>>
>>Have you made any progress with your performance issues?
>*
>Since we could not figure out the cause of the problem, I decided to address the symptoms and make sure that all SQL queries /JOINs are optimized, which helped. The problem seems to be related to file locking (as soon as the 2nd user is on using the application, the performance slows down 10 fold, and it remains as slow that regardless of the number of additional users). It is an ongoing issue right now; I may come back here with more news. Anyway, what's puzzling is that we see this only at a couple of clients; everyone else is fine.
>Thank you all for your suggestions.

Someone earlier suggested temporarily disabling real-time antivirus scanning, which can be a classic cause of the symptoms you describe. I didn't see any update that you tested that. Remember that AV should be disabled on both server and all involved workstations.

Another thing would be to view the server's Event Logs for any warnings or errors.