I verified that I can solve this system using the default ksp and pc settings in 77 iterations for the first timestep (initial guess zero) and in 31 iterations for the second timestep (nonzero initial guess).
I adopted your suggestion to use the multiplicative field split as a starting point. My reading of the PETSc manual suggests to me that the preconditioner formed should then look like:
My interpretation of the output suggests that the solvers within each fieldsplit are converging nicely, but the global residual is not decreasing after the first few iterations. Given the disparity in residual sizes, I think that there might be a problem with the scaling of the pressure variable (I scaled the continuity equation by eta/dx where dx is my grid spacing). I also scaled the (1,1) block in the preconditioner by this scale factor. Thanks again for all of your help.
0 KSP Component U,V,P residual norm [ 0.000000000000e+00, 1.165111661413e+06, 0.000000000000e+00 ]
Residual norms for stokes_ solve.
0 KSP unpreconditioned resid norm 1.165111661413e+06 true resid norm 1.165111661413e+06 ||r(i)||/||b|| 1.000000000000e+00
Residual norms for stokes_fieldsplit_0_ solve.
0 KSP unpreconditioned resid norm 1.165111661413e+06 true resid norm 1.165111661413e+06 ||r(i)||/||b|| 1.000000000000e+00
1 KSP unpreconditioned resid norm 3.173622513625e+05 true resid norm 3.173622513625e+05 ||r(i)||/||b|| 2.723878421898e-01
2 KSP unpreconditioned resid norm 5.634119635158e+04 true resid norm 1.725996376799e+05 ||r(i)||/||b|| 1.481399967026e-01
3 KSP unpreconditioned resid norm 1.218418968344e+03 true resid norm 1.559727441168e+05 ||r(i)||/||b|| 1.338693528546e-01
1 KSP Component U,V,P residual norm [ 5.763380362961e+04, 1.154490085631e+05, 3.370358145704e-12 ]
1 KSP unpreconditioned resid norm 1.290353784783e+05 true resid norm 1.290353784783e+05 ||r(i)||/||b|| 1.107493665644e-01
Residual norms for stokes_fieldsplit_0_ solve.
0 KSP unpreconditioned resid norm 1.290353784783e+05 true resid norm 1.290353784783e+05 ||r(i)||/||b|| 1.000000000000e+00
1 KSP unpreconditioned resid norm 1.655137188235e+04 true resid norm 1.655137188235e+04 ||r(i)||/||b|| 1.282700301076e-01
2 KSP unpreconditioned resid norm 1.195941831181e+03 true resid norm 4.554417355181e+03 ||r(i)||/||b|| 3.529588093508e-02
3 KSP unpreconditioned resid norm 8.479547025398e+01 true resid norm 3.817072778396e+03 ||r(i)||/||b|| 2.958159865466e-02
2 KSP Component U,V,P residual norm [ 2.026983725663e+03, 2.531521226429e+03, 3.419060873106e-12 ]
2 KSP unpreconditioned resid norm 3.243032954498e+03 true resid norm 3.243032954498e+03 ||r(i)||/||b|| 2.783452489493e-03
Residual norms for stokes_fieldsplit_0_ solve.
0 KSP unpreconditioned resid norm 3.243032954498e+03 true resid norm 3.243032954498e+03 ||r(i)||/||b|| 1.000000000000e+00
1 KSP unpreconditioned resid norm 1.170090628031e+02 true resid norm 1.170090628031e+02 ||r(i)||/||b|| 3.608013376517e-02
2 KSP unpreconditioned resid norm 9.782830529900e+00 true resid norm 1.741722174777e+01 ||r(i)||/||b|| 5.370658267168e-03
3 KSP unpreconditioned resid norm 6.886950142735e-01 true resid norm 1.636749336722e+01 ||r(i)||/||b|| 5.046971028932e-03
3 KSP Component U,V,P residual norm [ 7.515013854917e+01, 7.515663601801e+01, 3.418919176066e-12 ]
3 KSP unpreconditioned resid norm 1.062829396540e+02 true resid norm 1.062829396540e+02 ||r(i)||/||b|| 9.122124786317e-05
Residual norms for stokes_fieldsplit_0_ solve.
0 KSP unpreconditioned resid norm 1.062829396540e+02 true resid norm 1.062829396540e+02 ||r(i)||/||b|| 1.000000000000e+00
1 KSP unpreconditioned resid norm 5.373578062042e+01 true resid norm 5.373578062042e+01 ||r(i)||/||b|| 5.055917797846e-01
2 KSP unpreconditioned resid norm 1.199305097134e+00 true resid norm 3.492111756827e+01 ||r(i)||/||b|| 3.285674792393e-01
3 KSP unpreconditioned resid norm 9.508597255523e-02 true resid norm 3.452079362567e+01 ||r(i)||/||b|| 3.248008922038e-01
4 KSP Component U,V,P residual norm [ 7.495897679790e+01, 7.527868410560e+01, 3.418919160091e-12 ]
4 KSP unpreconditioned resid norm 1.062343093509e+02 true resid norm 1.062343093509e+02 ||r(i)||/||b|| 9.117950911420e-05
Residual norms for stokes_fieldsplit_0_ solve.
0 KSP unpreconditioned resid norm 1.062343093509e+02 true resid norm 1.062343093509e+02 ||r(i)||/||b|| 1.000000000000e+00
1 KSP unpreconditioned resid norm 5.419252803207e+01 true resid norm 5.419252803207e+01 ||r(i)||/||b|| 5.101226558840e-01
2 KSP unpreconditioned resid norm 1.431134174522e+00 true resid norm 3.339055236737e+01 ||r(i)||/||b|| 3.143104386088e-01
3 KSP unpreconditioned resid norm 9.760479467902e-02 true resid norm 3.304522520358e+01 ||r(i)||/||b|| 3.110598205561e-01
5 KSP Component U,V,P residual norm [ 7.491128585963e+01, 7.523275560552e+01, 3.418919008441e-12 ]
5 KSP unpreconditioned resid norm 1.061681132221e+02 true resid norm 1.061681132221e+02 ||r(i)||/||b|| 9.112269384837e-05
Residual norms for stokes_fieldsplit_0_ solve.
0 KSP unpreconditioned resid norm 1.061681132221e+02 true resid norm 1.061681132221e+02 ||r(i)||/||b|| 1.000000000000e+00
1 KSP unpreconditioned resid norm 5.343215079492e+01 true resid norm 5.343215079492e+01 ||r(i)||/||b|| 5.032787074508e-01
2 KSP unpreconditioned resid norm 1.288069736759e+00 true resid norm 3.308925591301e+01 ||r(i)||/||b|| 3.116684935691e-01
3 KSP unpreconditioned resid norm 9.505248953960e-02 true resid norm 3.281875055845e+01 ||r(i)||/||b|| 3.091205971589e-01
6 KSP Component U,V,P residual norm [ 7.481188568118e+01, 7.527346267608e+01, 3.418918860626e-12 ]
6 KSP unpreconditioned resid norm 1.061268694649e+02 true resid norm 1.061268694649e+02 ||r(i)||/||b|| 9.108729487455e-05
Residual norms for stokes_fieldsplit_0_ solve.
0 KSP unpreconditioned resid norm 1.061268694649e+02 true resid norm 1.061268694649e+02 ||r(i)||/||b|| 1.000000000000e+00
1 KSP unpreconditioned resid norm 5.300383444945e+01 true resid norm 5.300383444945e+01 ||r(i)||/||b|| 4.994384053416e-01
2 KSP unpreconditioned resid norm 1.118785004087e+00 true resid norm 3.282090953364e+01 ||r(i)||/||b|| 3.092610730828e-01
3 KSP unpreconditioned resid norm 9.758015489979e-02 true resid norm 3.259718081014e+01 ||r(i)||/||b|| 3.071529479244e-01
7 KSP Component U,V,P residual norm [ 7.475024970669e+01, 7.530858268154e+01, 3.418918784089e-12 ]
7 KSP unpreconditioned resid norm 1.061083524362e+02 true resid norm 1.061083524362e+02 ||r(i)||/||b|| 9.107140195255e-05
Residual norms for stokes_fieldsplit_0_ solve.
0 KSP unpreconditioned resid norm 1.061083524362e+02 true resid norm 1.061083524362e+02 ||r(i)||/||b|| 1.000000000000e+00
1 KSP unpreconditioned resid norm 5.296981668051e+01 true resid norm 5.296981668051e+01 ||r(i)||/||b|| 4.992049679820e-01
2 KSP unpreconditioned resid norm 9.379451887610e-01 true resid norm 3.378466967056e+01 ||r(i)||/||b|| 3.183978348066e-01
3 KSP unpreconditioned resid norm 9.102580142867e-02 true resid norm 3.360853440947e+01 ||r(i)||/||b|| 3.167378781957e-01
8 KSP Component U,V,P residual norm [ 7.464535615814e+01, 7.537007679541e+01, 3.418918790515e-12 ]
8 KSP unpreconditioned resid norm 1.060781677449e+02 true resid norm 1.060781677449e+02 ||r(i)||/||b|| 9.104549482946e-05
Residual norms for stokes_fieldsplit_0_ solve.
0 KSP unpreconditioned resid norm 1.060781677449e+02 true resid norm 1.060781677449e+02 ||r(i)||/||b|| 1.000000000000e+00
1 KSP unpreconditioned resid norm 5.281972737642e+01 true resid norm 5.281972737642e+01 ||r(i)||/||b|| 4.979321240109e-01
2 KSP unpreconditioned resid norm 9.224594814880e-01 true resid norm 3.351285171891e+01 ||r(i)||/||b|| 3.159260046751e-01
3 KSP unpreconditioned resid norm 9.143100662935e-02 true resid norm 3.329269756083e+01 ||r(i)||/||b|| 3.138506091177e-01
9 KSP Component U,V,P residual norm [ 7.451688471900e+01, 7.544516987344e+01, 3.418918860847e-12 ]
9 KSP unpreconditioned resid norm 1.060412172952e+02 true resid norm 1.060412172952e+02 ||r(i)||/||b|| 9.101378074496e-05
Residual norms for stokes_fieldsplit_0_ solve.
0 KSP unpreconditioned resid norm 1.060412172952e+02 true resid norm 1.060412172952e+02 ||r(i)||/||b|| 1.000000000000e+00
1 KSP unpreconditioned resid norm 5.275132249899e+01 true resid norm 5.275132249899e+01 ||r(i)||/||b|| 4.974605520805e-01
2 KSP unpreconditioned resid norm 7.755381284769e-01 true resid norm 3.453933285011e+01 ||r(i)||/||b|| 3.257161105001e-01
3 KSP unpreconditioned resid norm 7.298768665179e-02 true resid norm 3.435179316160e+01 ||r(i)||/||b|| 3.239475558447e-01
10 KSP Component U,V,P residual norm [ 7.451431102619e+01, 7.544762349626e+01, 3.418918857322e-12 ]
10 KSP unpreconditioned resid norm 1.060411544587e+02 true resid norm 1.060411544587e+02 ||r(i)||/||b|| 9.101372681321e-05
Residual norms for stokes_fieldsplit_0_ solve.
0 KSP unpreconditioned resid norm 1.060411544587e+02 true resid norm 1.060411544587e+02 ||r(i)||/||b|| 1.000000000000e+00
1 KSP unpreconditioned resid norm 5.276103518337e+01 true resid norm 5.276103518337e+01 ||r(i)||/||b|| 4.975524403961e-01
2 KSP unpreconditioned resid norm 7.777079890360e-01 true resid norm 3.454373663425e+01 ||r(i)||/||b|| 3.257578325186e-01
3 KSP unpreconditioned resid norm 7.356028471071e-02 true resid norm 3.435584054266e+01 ||r(i)||/||b|| 3.239859158269e-01
11 KSP Component U,V,P residual norm [ 7.438335197779e+01, 7.553731959735e+01, 3.418918856471e-12 ]