You'd expect backups to run fastest when you perform them from the server that hosts the databases. However, you'll probably obtain the best performance by putting your backup device on the Exchange server. If you put the device on the Windows Storage Server system, doing online backups means transferring data twice (once from Windows Storage Server to the Exchange server, where the Extensible Storage Engine--ESE--backup API runs, then back to the storage server to be written to tape).
In most cases, you'll run Eseutil on Windows Storage Server because Eseutil requires local access to physical database pages. The exception is Eseutil's soft recovery mode, which plays back transaction logs to make a database consistent. Microsoft recommends using the /r switch from the Exchange server, not the storage server.
The Feature Pack supports using the Recovery Storage Group for fast recovery, but you have to create a Recovery Storage Group on your Exchange server, then move it to the Windows Storage Server system before you attempt to mount databases in it. The Recovery Storage Group counts against the total number of SGs that the Feature Pack supports.
VSS support on Windows Storage Server and the Feature Pack can be a bit confusing. Windows Storage Server supports VSS on ordinary file shares; when used this way, VSS keeps shadow copies of protected files so that users can easily recover old versions of files. However, when you say "VSS" to an Exchange administrator, he or she will most likely think of using VSS to make point-in-time copies of databases or SGs, which the Feature Pack doesn't currently support. You can use VSS to protect your databases by making offline copies of them, just as if they were Microsoft Word or Microsoft Office Visio 2003 documents in a file share. However, when you do so, you essentially make an offline backup and are subject to all the restrictions and hassles detailed in the Microsoft article "Offline Backup and Restoration Procedures for Exchange" (http://support.microsoft.com/?kbid=296788).
An Intriguing Approach
If Windows Storage Server were just another bits-in-a-box solution, it wouldn't be very interesting. However, given its tight integration with Active Directory (AD), its ability to host Exchange data, and its broad vendor support, Windows Storage Server is intriguing. One nifty feature is that you can use the same Windows Storage Server system to host file shares and Exchange shares at the same time, meaning that you can easily consolidate multiple servers in one system without having to invest in a SAN and the specialized expertise it requires. If your environment fits into Microsoft's target market, you might find that compared with a SAN, the Windows Storage Server Feature Pack combination delivers a lower-cost, easier-to-manage solution for your Exchange storage.