Re: Will a host that is down cause the virtual machine to show as down as well?

Direct answer:

• In your alert trigger condition add the following:
  • trigger when all the following conditions are true
    • guest status is down
    • guest custom property = xxxxx
    • guest name = xxx
    • ESX_host status = up
    • bla
      
      
• That way the guest will only alert if ESX_host is up

Smart-ass answer:

• Cluster your ESX servers and have the guests vMotion to another node in the cluster when the node goes down.
• Yes it will cost money but if you're virtualizing a bunch of systems onto one ESX, I recommend you finish the infrastructure buildout.
• Clustered ESX servers are (IMHO) specifcally for protecting against hardware failures on single ESX nodes.

Side note:

• If ESX clustering is too expensive, consider other virtualization platforms. One option is Linux KVM http://www.linux-kvm.org/page/Main_Page

Chris