I've been fighting an issue for several days with guest processing (SQL backups) and while I have finally made some headway, I want to share what I've learned because I feel like this is a bug.
How I created the job initially:
We are using SCVMM and guests live on several CSVs (about 14 CSVs). I created a backup job per CSV and added JUST the CSV to the backup job, not guests. I did however add Exclusions for guests that I do not want to back up. Under Guest Processing, I added individual guests that I want to process by clicking Add, browsing the CSV, and selecting those VMs. The default Object was set to VSS processing Disabled, but for each of the VMs that were added, I set SQL backup options. Credentials were added on the job in a similar fashion (this is a multi-tenant setup, so each VM could have its own set of credentials).
The subsequent 'SQL Server Transaction Log Backup' jobs using this method always fail with the warnings: "Failed to prepare guest for SQL Server transaction log backup Details: No accessible proxies" I have troubleshot network connectivity, permissions, etc, and had no issues that I could find.
I re-created the jobs by manually specifying guest VMs rather than specifying the CSV. Everything else was set the same, except now, the jobs don't enumerate the VMs when they run, since they are all explicitly added. Using this method, the SQL backup processes actually complete perfectly as expected (so far). The downside is that now the dynamic nature of my jobs is gone, forcing us to go through a manual process of adding/removing VMs.
I have opened ticket 01726633 on this as well, and it contains some of my logs.