Ok, let me see if I can explain this properly.
You can have two elements backing a virtual hard drive, for now at least.
1. A file, which has it's own limitations
2. A zvol which, again, has it's own particularity
A zvol is similar to a logical volume. This allows zfs to work its magic whereas the image file strategy does not allow, zfs sees a file and treats your data as a file in a data set.
The problem with zvols is that you don't have access to your data from freenas just as a regular dataset and your data doesn't look like a file which you can easily copy. But you can make snapshots of a zvol, you can replicate them, copy them locally so you may let's say go back in time with a vm that was messed up.
All in all you want zvols, not image files. Oh and zvols can be grown without stopping the vm. You know almost prod like :D
P.S.: Don't try to clone a VM just yet, the UI errors out. You can do it by hand.