VAAI is not in play and the only place it comes into play is the block unmap thin provisioning API to reclaim the blocks after the move, which is being disabled as per KB article - http://kb.vmware.com/selfservice/microsites/search.do?language=en_US&cmd=displayKC&externalId=2007427
You are using iSCSI storage, and the traffic (copying blocks) is going to be on the network. Storage VMotion works on the IO mirroring filters in the layers above vmfs (the Data mover is the actual module which does the move).
i dont' see a problem, it working as per design
give a call to VMware support, and see if they say the same.
--Ravi
