Since there are no benchmarks or any system usage measurements I can only give some general recommendations.
> I am using Moodle 1.9.7.
People have reported some performance issues with this version. In any case update to the latest 1.9. Don't neglect the usual precausions, if something goes wrong you must be able to come back to exactly the same setup you had before starting the update.
> My Moodle site runs on a Virtual Private Server on Linux Centos 5.3 with 512 Mb RAM, CPU 250 Mhz.
CentOS is a good choice. Still a VPS with 512 MB RAM is weak for a busy Moodle site. How does the 250 MHz compare to a physical processor, can you give a comparable Intel or AMD model?
> Maximum number of users in the computer lab is 30 users. Usually < 15 users concurrently online.
As often repeated here, what those users are doing is very important. If they just scan pages or write forums postings or working on local programms they consume much less power compared to taking online tests.
> Even with a 2.0Mbps ADSL line pumped into the lab, access is painfully slow.
You say the downlink to the lab is 2 Mbit/s? That is not high for an ADSL? You can measure the throughput of the network connection by downloading a big file from the server.
In any case, could there be a problem with the school network? Firewalls, proxyservers, DNS, ...?
What is the uplink speed of your server?
> My webhost page is http://www.internet-webhosting.com/vps.php
BTW, the USD 25 Linux solution, 'Basic Container', says 256 MB. ??
> Funny thing is, most of my students who access my site from their homes report that the site loads up okay - from home.
May be at those times there are fewer users. That's why you need usage measurements correlated to times of poor performance.
> Anyone out there who can advice me on some benchmarking code to test how fast or slow my site is? I've read about the Performance Perspective Script
but I am unwilling to take risks with running it on my production site.
The Moodle-specific alternative is the new e-peen script http://moodle.org/mod/forum/discuss.php?d=162251
Otherwise you have to go for general system performance monitors like http://munin-monitoring.org/
> I've attached the list of activities (mods), blocks and filters that i have installed on my Moodle 1.9.7 site. It's not a very long list.
The filters consume power. You can deactivate them and compare.
BTW. your attachment has two problems. Just for three lists of names, you don't need a spread sheet. The posting itself can handle that. In case you need one, try to use an open format, like those from OpenOffice.org, if you must take the 'old' office format DOC, XLS extra, for God's sake not their OOXML blemish DOCX, XLSX of the MS Office 2010!