I thought I'd state the bleedin obvious that I didn't get until I had to install Lab Manager 4 and then scratch my head for a day.
When you use Cross Host Fencing, you need to think about the external networking. The network packets between VMs that are residing on different networks don't jump magically get transported without using the physical network - told you it was obvious!!
The way that Cross Host Fencing works is that a Host Spanning Transport Network needs to exist where the traffic will flow across. Each ESX host in the cluster will have a single VM created (don't touch it) named something like
nnnnnn-VMware-ServiceVM-Ixx-YYwhere nnnnnn is a number (e.g. 000001), xx is the Lab Manager Installation ID and YY is some letter number combination that is the same for each VM.
As I said, never ever touch these machines. If you are having problems with Cross Host Fencing, you can recreate these machines by disabling the individual hosts from Host Spanning, and then re-enabling it. this removes these VMs and creates new ones, but will obviously break any configurations that are using Cross Host Fencing.
These machines are connected to the VLAN that you have configured as your Host Spanning Transport Network on a Port Group that is created on the dvSwitch that you specified when configuring the Host Spanning Transport Network. The Port Group is named:
dvSwitchx-LMService-yLMxx
where y is a number and xx is the Lab manager Installation ID.