Do other VM softwares have this issue?
Such as XEN, KVM, or VMWare?
My gut feeling is system strain. I would check out VMWare Server and see if a VM under that runs oddly. If so, I would say either your HD is not keeping up, or not enough RAM/CPU to handle the load.
Then again, I had no trouble running VMWare on an old P233MMX and 96MB RAM This was also 2001 ... but alas ... bad memories of the phone co. gig