>If no-one has mentioned antivirus, and you have AV running on the server try turning it off temporarily for a test and/or configuring it to not scan your executables, tables etc.

I'll check this out.

>
>If you take a look at the W2K server, what's its general RAM usage (is Commit Charge total > Physical total)? and what is CPU utilization while your app is running?

CPU utilization in the server does not change much. The local machine gets the spikes.