I have a small environment running 1 VM server and 5 VM Desktops. Performance on the Desktop side is the issue.

Server Hardware:
1 - Dell 2950 / 2-Quad 2.8ghz Proc / 16gb RAM / 1.2TB of local storage - 15k RPM HD's / 2 - Dual NIC's (1 NIC = 2 VM Desktops, 1 NIC = 3 VM Desktops and 2 NIC = Server)

Software:
Server -> SBS 2008
PC's -> Windows XP Pro SP3 - Office 2003, ERP Application, File Maker, Adobe and WinZip

Virtual Hardware:
1 2.8ghz Proc / 1gb RAM / 25gb C:\ drive (15gb free)

Physical Hardware used for Virtual PC's:
Dell Dimension 2400 -> 2.4ghz Single Proc, 512mb or 768mb RAM, 100mb NIC

Issues:
VM users are seeing slowness issues when attaching documents to emails in Outlook.
Refresh is slow when changing from one email to another.
Working in one application and then toggling to another hangs the desktop for a bit.
Generally speaking applications seem to be slow.

What is my bottleneck? Is this typical or is there a config change that can be made to resolve the issues?

Help would be greatly appreciated.

Marc