Re: install or upgrade to ESXi 4.0
I've moved your post to the ESXi 4.0 Install Problems and Questions forum.
If you're not using an oem.tgz file with your ESXi 3.5 install then I would just upgrade - http://www.vm-help.com/esx40i/ESXi40_up ... center.php
With a modified oem.tgz, you might still upgrade, but you have to keep in mind that ESXi 4.0 might have better files than you've included in oem.tgz. For example, the e1000e and e1000 drivers are updated, and simple.map has been expanded. So if that impacts you, then I would consider a fresh install (note that a new install with 4.0 does wipe all data on the install drive).
Or you could upgrade and then review what's in oem.tgz to see if you can go back to the default file for it.
Oem.tgz is still used with ESXi 4.0, but not for the install process. Once you have it installed and check out /bootbank/ you will find it there again.