Have you noticed any VmWare server 2 performance issues? Can it be used for less important production systems?
The performance for VMware Server 2 is decent. I always try to get the fastest hard drives, since that takes the biggest overhead hit from the virtualization layer. I would not recommend running database servers on VMware Server 2 unless the load is very light.
If you are new to VMware, then I would gradually add virtual machines and monitor their performance. I usually weight (on performance impact) hard drives, then RAM, then CPU.
VMware Server 2 has been pretty solid for me as well and I have had no complaints since upgrading from 1.6. In my opinion, it should be just fine for running less important production systems. In our server environment, we have been using it mostly for development and testing servers and just recently we converted our Web server (via VMware Converter) to a full-on virtual server utilizing VMware Server 2. Thus far, it has proved to be secure and reliable and freed up some of the server resources for other projects. The only real thing that has been an issue has been memory management since that always seems to be the resource in highest demand on system hosting virtual machines.
The takeaway from this would be to start slowly rolling our virutalization in your own environment as you get comfortable with it. Once implemented it will be entirely transparent to your end users.
I haven't noticed a performance hit on the virtual machines since upgrading to VS2, however the host requirements are much higher. I found a suggestion to disable the web interface service on the host (Vmware Server Web Access) and install the VmWare Infrastructure Client to manage VMs instead, and this is working much better.
We are using VMWare Server 2 and it is working fine. However, it is true that the VMWare Server Web Access is slow and unreliable. I had trouble accessing it from Internet Explorer because of certificate issues. It's easier on Firefox because I was able to overcome the same certificate issues.
Firefox is crashing very often after many operations in the Server Web Access. The best is to create direct Desktop shorcuts to virtual machines so you can avoid the Web Access as much as you can.
If you go the VMWare Infrastructure Client, be careful about compatibility issues, especially on Vista and newer systems.
Regarding performance on your VMs; I've heard one recommended practice is to have your VM's Pagefiles on separate physical disks/arrays. That's one place you'll see a lot of I/O and will slow down the system as a whole.