If you have a Failover Cluster managed by VMM 2008, it is possible that you will get a placement page similar to the one below if you try to clone a Highly Available Virtual Machine that is part of the cluster. The placement page in the new-vm wizard below incorrectly states that the transfer type will be SAN. New Virtual Machines are always transfered (or created) over the LAN because we need to copy the binaries over to the target location for the VM. That copy is always done using BITS.

You can go ahead and ignore this transfer type and select the Host that best matches your needs for this Virtual Machine and complete the wizard. Our team is investigating a fix for this :)