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I've installed VirtualBox 4.3.20 64-bit with extension pack and guest additions on my host OS X Josemite v10.10.1.
My guest is Windows 7 Ultimate 64-bit

Everything was working fine for 2-3 days but now after running for 5 min guest is hanging and then aborting. It happens every time at the same time.

I've looked into VBox log files and following is the error that shows up (note the run time of 5:39 min):

00:05:39.187993 AioMgr0-N: Request 0x00000103588b40 failed with rc=VERR_INVALID_PARAMETER, migrating endpoint /Users/sinisalusic/VirtualBox VMs/Windows 7 Ultimate VM/Windows 7 (64 bit) VM HD.vdi to failsafe manager.
00:05:53.882299 AHCI#0P0: Read request was active for 29 seconds
00:05:53.882358 AHCI#0P0: Read at offset 7775809536 (32768 bytes left) returned rc=VERR_DEV_IO_ERROR

Searching the error, I couldn't pinpoint what the exact issue is. I assume it's disk I/O related. Some notes are mentioning checking the "Use Host I/O cache" flag under the SATA Controller which in my case flag was checked already.

First two VBox logs and OS X console log are attached. Any help would be appreciated.

Here is my VirtualBox System Setup:

General
Name: Windows 7 Ultimate VM

OS Type:
Windows 7 (64 bit)

System
Base Memory: 4096 MB
Processor(s): 1
Execution Cap: 100%
Boot Order: CD/DVD, Hard Disk
VT-x/AMD-V: Enabled
Nested Paging: Enabled

Display

Video Memory: 128 MB
3D Acceleration: Enabled
2D Video Acceleration: Enabled

Remote Desktop Server: Disabled

Storage
Controller: IDE
IDE Secondary Master (CD/DVD): Empty
Controller: SATA
SATA Port 0: Windows 7 (64 bit) VM HD.vdi (Normal, 206.90 GB)

Audio
Host Driver: CoreAudio
Controller: Intel HD Audio

Network
Adapter 1: Intel PRO/1000 MT Desktop (Bridged adapter, en0: Ethernet)

Serial Ports
Disabled

USB
Device Filters: 0 (0 active)

Shared Folders
None

I would reboot the Mac in single-user mode and run 'fsck -f' to check the host's hard drive.

I've done repair disk by booting in Recovery System mode and using Disk Utility as suggested by Apple for my version of OS X.
The disk had no errors.

I would trying turning off "Use host I/O cache" for the virtual SATA controller.

I did try turning off "Use host I/O cache" and it didn't make any difference.
However, I've started Windows in safe mode with networking, used it for about 20 minutes without hanging.
This would seem to indicate that issue is not with disk but whatever is difference between safe mode and normal boot (additions, window drivers, etc.)

You definitely turned it off in the SATA controller, right? Because it's the SATA controller that's reporting aborted I/Os.

Next thing you could try is moving your hd onto your IDE controller, and doing away with SATA. I would also suggest reducing the RAM allocation to the guest by at least 1GB.

I've moved hd to IDE and lowered the memory to 3gb. I'm not aborting any more.
on the same 5 min mark I got VERR_DEV_IO_ERROR but machine didn't abort. On 14 min mark some more errors. Every time when errors are report my host is frozen for a few seconds.

00:01:23.205164 RTC: period=0x20 (32) 1024 Hz
00:01:23.555214 RTC: period=0x200 (512) 64 Hz
00:04:48.492248 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0xe7bcb8 cSectors=0x40)
00:04:48.492338 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:05:08.228740 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0xe7bcb8 cSectors=0x40)
00:05:08.228787 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:05:27.948730 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0xe7bcb8 cSectors=0x40)
00:05:27.949283 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:05:47.643283 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0xe7bcb8 cSectors=0x40)
00:05:47.767566 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:06:07.421397 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0xe7bcb8 cSectors=0x40)
00:06:07.421442 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:06:27.466351 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0xe7bcb8 cSectors=0x40)
00:06:27.466398 PIIX3 ATA: execution time for ATA command 0x25 was 15 seconds
00:06:47.086123 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0xe7bcb8 cSectors=0x40)
00:06:47.135371 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:07:06.872536 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0xe7bcb8 cSectors=0x40)
00:07:06.872583 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:07:26.667293 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0xe7bcb8 cSectors=0x40)
00:07:26.667316 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:07:27.822344 RTC: period=0x20 (32) 1024 Hz
00:07:27.860927 RTC: period=0x100 (256) 128 Hz
00:07:28.017277 RTC: period=0x20 (32) 1024 Hz
00:07:36.215550 RTC: period=0x80 (128) 256 Hz
00:07:36.227562 RTC: period=0x200 (512) 64 Hz
00:14:52.444381 PIIX3 ATA: execution time for ATA command 0x35 was 8 seconds
00:15:08.018877 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:22:07.799877 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0x2d8ab88 cSectors=0x20)
00:22:07.799938 PIIX3 ATA: execution time for ATA command 0x25 was 15 seconds
00:22:27.394562 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0x2d8ab88 cSectors=0x20)
00:22:27.394608 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:22:47.089408 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0x2d8ab88 cSectors=0x20)
00:22:47.175941 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:23:06.792570 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0x2d8ab88 cSectors=0x20)
00:23:06.792617 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:23:26.470697 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0x2d8ab88 cSectors=0x20)
00:23:26.470761 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:23:46.173886 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0x2d8ab88 cSectors=0x20)
00:23:46.245282 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:24:05.918606 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0x2d8ab88 cSectors=0x20)
00:24:05.918664 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:24:25.580096 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0x2d8ab88 cSectors=0x20)
00:24:25.580159 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:24:45.208195 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0x2d8ab88 cSectors=0x20)
00:24:45.280872 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:25:00.219065 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0x2d8ab88 cSectors=0x20)
00:25:00.219065 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:25:19.897123 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0x2d8ab88 cSectors=0x20)
00:25:19.994315 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds
00:25:39.700219 PIIX3 ATA: LUN#0: disk read error (rc=VERR_DEV_IO_ERROR iSector=0x2d8ab88 cSectors=0x20)
00:25:39.782874 PIIX3 ATA: execution time for ATA command 0x25 was 14 seconds

Now I've turned off "Use host I/O cache" on IDE drive and I'm not getting error messages any longer.
Will monitor it for a couple of days and report back.

After 20 minutes running with turned off "Use host I/O cache" on IDE drive and I'm getting following error messages:

00:19:08.497766 AIOMgr: Host limits number of active IO requests to 0. Expect a performance impact.
00:19:54.035243 PIIX3 ATA: Ctl#0: RESET, DevSel=0 AIOIf=0 CmdIf0=0x25 (60463248 usec ago) CmdIf1=0x00 (-1 usec ago)
00:19:54.331839 PIIX3 ATA LUN#0: Async I/O thread probably stuck in operation, interrupting
00:19:54.644023 PIIX3 ATA LUN#0: Async I/O thread probably stuck in operation, interrupting
00:19:55.175552 PIIX3 ATA LUN#0: Async I/O thread probably stuck in operation, interrupting

I got blue screen upon powering down vm.

Ok, now I suggest you start checking the state of the disk on the host, because that is now looking like host I/O errors being passed on to the guest. When I had symptoms similar to yours (though not as bad) I ended up replacing the host drive, however it might just be a corrupted filesystem which you might be able to fix with fsck.

Ran fsck and disk was fine. It says that volume Macintosh HD appears to be OK.
What approach you would suggest now? Should I dump everything and reinstall VirtualBox from scratch and reinstall windows 7 or could I just create new vdi and new Windows 7 on the existing VirtualBox installation or maybe something else.

Reinstalling VirtualBox will not fix host problems. I would however back up the VMs, if you care about them.

I've dumped existing Windows 7 VM and created new Windows 7 VM and so far don't have an issues.
Thank you for all of your help.