Just a thought we had something like this a long time ago... I was sure it was storage it ended up being memory and CPU limit on the vm. We would see really bad performance on the vm storage wise but the real issue was the vm had limit causing storage I/O wait time. I would look into the virtual machine settings and look at reservation / limit. Remember that even reservation does not override limit.
If you don't have a limit try setting a reservation for all CPU / Memory then test again. If it fails again there is something really wrong with the I/O stack on your virtual machine OS. (You should also try to vmotion it to another datastore)
If you know how to use ESXTOP you may quickly find some information about your issue using the m, c or v buttons.
Let me know what else you find.