As you probably already know, DAVG refers to disk latency, and yeah, greater than 30msec is usually going to give you a noticeable decrease in performance and responsiveness. Latency can be caused by a lot of issues but first and foremost your disks must be able to handle the IO load you are throwing at them.
IO load refers not only to the # of IO's per second (IOPS), but also the pattern. Random (pattern) I/O is pretty much what you expect from virtualized servers, so your disk configuration needs to do well from a random I/O perspective. Unfortunately, RAID-Z doesn't fit the bill. According to Oracle:
The situation of random inputs is one that needs
special attention when considering RAID-Z.
Effectively, as a first approximation, an N-disk RAID-Z group will
behave as a single device in terms of delivered random input
IOPS. Thus a 10-disk group of devices each capable of 200-IOPS, will
globally act as a 200-IOPS capable RAID-Z group. This is the price to
pay to achieve proper data protection without the 2X block overhead
associated with mirroring.
Oracle says here that a RAID-Z set can handle about the same number of random IOPS as a single disk in the set. A single 7.2k disk can do about 80 IOPS (and that may be a generous number, depending on who you ask), so that means in RAID-Z your entire array can only do 80 random IOPS. Running 5-7 servers on that few IOPS is a recipe for terrible performance.
You would see far better performance if you configured your 4 drives in a RAID-10 set. If you need more than 2TB RAW capacity (which is what you'd get in RAID-10), do RAID-5. Either will give you better random I/O performance than RAID-Z in this case.