Comes down to how much footage you have to keep around.
Obviously for editing you’ll want to keep all your footage in it’s native format. When it comes to archiving, it’s hard to say. If you are archiving with an intention to be able to go back and work with it later, going to h.264 doesn’t make much sense (h.264 is not an editing codec). You are still stuck with all that source media AND the h.264 of the same thing with nowhere to put it that will save you any space.
I know you mentioned you had issues with it, but having an LTO system in conjunction with your shared storage sounds like the best way to go. You have all your source media on the SAN to edit with. After the project is over, you can compress it all to h.264 screeners to keep around, and dump the native media to LTO tape for long term storage.
This gives you the best of both worlds, you have a small file around to screen and can bring back whatever full rez media you might need later.
You could do the same workflow with external drives and the SAN, but LTO is much more secure for long term archival purposes.
An example. The company I work for has a 150TB XSAN shared storage system. With the amount of work we do, we are running up against that 150TB more than you’d think. We installed an LTO system and as we delivery a series, all of that raw material is pulled from the SAN and put on LTO to make space for the next. If we ever need to go back, we have all the FCP projects, and can pull just what we need from LTO.