The hardware specifications you state are about the same as ours (Xeon dual processor, 4gb memory). We have a maximum 250 users online for a language placement test and have had no problems. We enroll about 5000 students so our non-testing load is low. So hardware, you should have no problem. However, your LAMP setup may affect your speed. When you set up LAMP, be sure to ask lots of questions.
Hardware and performance
BUILD A SERVER FOR MOODLE, HOW TO?
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