I'm currently trying to decide on the best approach to handle hosting a few moderate traffic websites for production e-commerce and online applications. We'd like to move to a dedicated server and are looking at this as the most likely machine:

Quad Core Intel Core2Quad Q9550 Processor, 2.83 Ghz X 4, 4 GB Kingston Ram

This would run Windows Web Server 2008 R2 x64 and potentially also Sql Server Web 2008 and SmarterMail server.

Given that we already pay for a high-end VPS for development, testing, shared version control we'd like to avoid going with two servers for production. We'd like to avoid using shared sql server hosting and have thought of using the development server as the database server as an option too - but potentially a security risk due to use for development by internal and contract users.

The questions are: - Do you feel there would be performance degradation by running this on the same machine? - Are there significant issues to be concerned about if we do this? We understand that best practice would be to run separate db and app servers but the volume of traffic is currently not that high and adding another server just for database is currently too costly. - What are others doing out there?

Alternatively, would you recommend instead going with two separate VPS servers with 2GB RAM each on Hyper-v which would be about the same cost as the single dedicated server above?

Thanks!