Just for the benefit of others, here is how I fixed the problem.
In vcenter console, click on host, configuration, Storage Adapters, click on the iSCSI Software Adapter vmhba32, click Properties, then Dynamic Discovery.
Add the DSS server IP in there (with the port 3260).
Then it all worked ie both nodes could now see the DSS server.
After that I also found problems with HA (could not get HA working on my 2 ESX nodes.)
During investigating the HA problems I found a discrepency in the subnet masks on Service Console 2. One node had a class B subnet, and the other had a class C subnet.
Once I fixed the discrepency and rebooted both the nodes and the vcenter machine, HA started to work.
This may explain why I needed to add the host in the Dynamic Discovery tab.
I will try to remove Dynamic discovery and see if the subnet mask discrepency was the root cause but I'd bet money that it was the root cause.
Allan