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Virtual servers do indeed take a bit of a performance penalty as opposed to running the same operating system directly on the host machine's hardware. Microsoft has done a lot of work to minimize the amount of performance lost in a virtual server, though, so the amount of overhead is actually pretty small -- generally no more than 10%.
The slowest CPU that Microsoft can support for running virtualized servers is a 550 MHz processor; they recommend 1 GHz or better. I would go so far as to say that anything less than 2 GHz is best for running more than two legacy servers on the same hardware.
The real bottleneck is often not CPU, but memory. Spare at least 512MB for the host operating system and 512MB-1GB for each emulated server as needed.
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