I hope all is well. Great questions !. Let's see what we can do to help clarify things a bit for you.
To begin with, We need to discuss the new file block format in VMFS-6:
VMFS-6 introduces two new block sizes, referred to as small file block (SFB) and large file block (LFB). While the SFB size can range from 64KB to 1MB for future use-cases, VMFS-6 in vSphere 6.5 is utilizing an SFB size of 1MB only. The LFB size is set to 512MB.
Thin disks created on VMFS-6 are initially backed with SFBs. Thick disks created on VMFS-6 are
allocated LFBs as much as possible. For the portion of the thick disk which does not fit into an LFB, SFBs are allocated.
These enhancements should result in much faster file creation times. This is especially true with swap file creation so long as the swap file can be created with all LFBs. Swap files are always thickly provisioned.
The 1MB SFB is simply the standardized value that VMware has specified for the implementation.
With regards to the overall concept of Block Size,
The block size on a VMFS datastore defines the maximum file size and the amount of space the file occupies. VMFS6 supports the block size of 1 MB.
The following article goes into the appropriate level of detail regarding sub-blocks and iNodes and how they are used to store smaller files. Stick to the VMWARE file system specifics, the I/O stuff is irrelevant for what you want to know.
virtualguido: VMware ESXi - I/O Block Size in Virtual ...
Before we get into the Windows NTFS filesystem it is important to understand what a sector or a cluster is. A sector is the smallest physical storage unit ...
The "original" information coming out of VMFS-3 is summarized here:
Virtual Machine File - Indian Institute of Technology Bombay
Virtual Machine File System Satyam B. Vaghani VMware, Inc. email@example.com ABSTRACT The Virtual Machine File System (VMFS) is a scalable and high
What does it all mean?
You are on the right track overall, but as you can see, there is a lot going on under the hood with regards to how storage blocks are allocated to carve up a drive, and then how files are allocated within those blocks.
The good news is that you are not expected to know this level of detail for any of the VCP exams, so unless you are looking to become a storage guru, you will not typically be dealing with these kinds of distinctions in the real world, as these functions are hard coded into the VMFS file system, and are not user defined.
If you have any other questions, please let me know.