Error" Creating a quiesced snapshot failed because the created snapshot operation exceeded the time limit for holding off I/O in the frozen vm"

You have to disable the SYNC or VSS driver within the guest operating system to allow non-quiesced backups of the virtual machine.
Note: VMware snapshot operations (quiesced) do not provide backups of any network attached storage mounted within the guest operating system (including iSCSI LUNs mounted via in-guest iSCSI software initiator, or CIFS/NFS share mounted within the guest operating system). For information on creating backups for these types of guest accessible storage, refer to your backup solution provider or storage hardware vendor for an appropriate solution.

Disabling VSS

This applies to virtual machines created on ESX 3.5 U2 or later.
To disable the VSS driver through VMware tools, open VMware Tools in the virtual machine and select Disable guest quiescing.

Disabling SYNC

This applies to virtual machines created on ESX 3.5u2 or prior.
To disable SYNC drivers:
  1. Open Device Manager, click View, and select Show hidden devices.
  2. Expand Non-Plug and Play Drivers.
  3. Right-click Sync Driver and select Disable.
  4. Click Yes twice to disable the SYNC driver and restart the virtual machine.

Implications of workaround

After removing the VSS and SYNC driver you do not have an application consistent backup of your guest operating system. Disabling the quiescing provides only a crash consistent backup of the virtual machine. This is similar to having a host powered off abruptly, then powering it back up, any data that was stored in memory is not saved to disk.
If you are running mission critical applications like Exchange, SQL, or Oracle, they require a separate backup process or workaround to ensure application level consistency. See Microsoft Exchange Server on a virtual machine can freeze under load when you take quiesced snapshots or use custom quiescing scripts (5962168) for an example of how to workaround quiescing operations in an Exchange environment. The same concepts within the article can be applied to most applications.