We are currently running moodle on a server that the computer club built from parts.
It is on an AMD 1100 with 768 megs of ram and and 2 IDE hand-me-down hard drives. One is for backup, and I copy the backup to another linux machine to be paranoid.
The OS is Whitebox Enterpise Linux (RHEL 3 rebuilt from source). The machine houses survey tools, gradebooks, various projects, some web pages from classes, etc. I do not use a gui and administer via WinSCP (or sometimes webmin when I am on campus). I use Zend Optimizer to keep things snappy. I am at about 60 days of uptime.
I figure it was 5 hours to install and initially set up this machine, but I am pretty compulsive. I spend probably 2 hours a week with various moodle-related administrative issues that are not a function of my own classes. I consider myself reasonably adept at basic server administration, but
there is no way I am as efficient as a UNIX-oriented IT group.
According to webalizer, I have averaged over 18,000 hits a day on the server for this month. There are about 40 courses in various states of activity. There are about 400 users. Many of the students are enrolled in more than one course. We have multiple moodle sites on the server, but there is one main academic site.
Budget on this is minimal as you can see. Performance has been great.
I am about to make a case for a hand-me-down server that is being upgraded. It is a dual P3 with scsi and a gig of ram.