Personally I would say 3 x hosts. then buy a large Supermicro machine and install Open-E for a SAN solution using SAS drives, Open-E do deals on server licensing for education on the cheap and you can build a large drive.
Take a look on the Broadberry website - you can do some pretty nifty custom server designs that would fit your needs.
Server 2012 with its 'almost real time mirroring' mode makes a SAN nearly useless as the data is duplicated between the two hosts and in small-medium installs this will be cheaper than having a SAN.
£10k will buy you quite a lot of nice kit but do remember you need software (if you don't already have Server 2012 cals through EES/SA) as well so don't forget to factor that in!
Ok, as your post was a little aggressive @Punkfish, I think I need to give a bit of a reasoned response.
This obsession with a SAN is pointless. A SAN is a specific piece of technology, an appliance if you will. We have shared storage which does all of what you discuss, but using a normal server. It isn't a special piece of kit.
So, personally I'd say that we should possibly stop using the term 'SAN' and use 'Shared Storage' instead.
A 2 server + shared storage solution is totally possible on a £10k budget. You just have to choose your components carefully.
I do agree though about the need for shared storage, doing it with replication or the like is adding extra software complexity to the solution that is more than likely going to come and bite you in the rear at some point. Follow the 'KISS' principal. Which is why I went for a simple Windows Server 2012 + Hyper-V using SMB3 solution. It took barely 10 minutes to configure once Server 2012 and Hyper-V were installed. Creating a server and enabling failover is a matter of a few clicks. No need for iSCSI, which face it, most people don't have the experience of in schools to be able to diagnose if it goes wrong - but they do know about standard Windows shares.
There's no need for extra specialist storage server software etc.
I was speaking to Luke @Millgate today and he is starting a HP offer soon, I think he said Monday (3rd December).
Might be worth a word :)
I agree that the word SAN could be substituted for shared storage, however a SAN is an optimised device that will provide better performance for similiar money to a specced up server (I am obviously not advocatinh EMC, NetApp or other lagre vendors here).
In the end it will just as easily come down to comfort levels with the technology, and some peole may feel more comfortabele with server based storwage than trying to take on board a new storage technologies as well as virtualisation
The post below by Punkfish also makes some excellent points as well though. I certainly will consider in the future the idea of higher RAM/Less machines.
P.s. I bet my SSD servers have higher IOPS than any of your SAN's ;)
Also forgot to mention our 3000Volt APC's cost 2 grand each, the server cabinet another 2k and the Rack monitor and keyboard/mouse pullout the same.
So probably looking at 18k for the full virtualization rollout.
One thing to remember is you don't have to do it all at the same time. It can be built in stages.
The point @localzuk makes about it being shared storage and not necessarily a typical SAN is also very valid. Just make sure you have plenty of NIC links from the SAN to the hosts - a couple of decent switches for failover and port aggregation are a must. There are also some very competitive NAS solutions from the lieks of QNAP and Thecus which have Citrix/VMWare certification.
Have you considered ISCSI for shared storage? It will be cheaper.
If you have any questions regarding Open-E PM me and I can try and answer them. If you want to see how easy it is to use build a vm in virtualbox and you can test it that way.
You can get a Dell Powervault MD3200i SCSI SAN with 6x500GB NSAS (posh sata) for £5,600 EX VAT.
(I hope you mean 10k ex VAT)