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PE2600 and VMWare Server

I just installed VMWare Server in a PE2600 (2CPU, 4GB Ram). The Host is running Windows 2000 with Citrix PS4.0. The new Guest is with Windows 2003 and Citrix PS4.5. Now, the System is too slow. The CPU usage in too high in both Host and Guest. Mostly, the process 'Vmware-vmx.exe' lot of CPU process. I would like to know:
- The PE 2600 does support inter virtualization?
- What to do to get speed up the server? I have given 2GB of Ram for the guest OS even though the mem usage is not an issue right now.
- Anybody went through this scenario? Please share your thoughts and suggestions to fine tune this setup

Any input is highly appreciated

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