While researching options for this article, I ran across some studies indicating that virtual machines can suffer significant issues both in processing and network performance. One study stated that "performance degradation by a factor of 2 to 3x for receive workloads, and a factor of 5x degradation for transmit workloads" could occur in some virtual servers.
Although this extreme level of degradation wasn't my experience, my virtual FreeNAS appliance did not perform as well as my physical FreeNAS appliance, most glaringly with Read performance (Figure 3) running 15-20% slower on the virtual machine, even with significant amounts of RAM allocated to the virtual machine.
Keep in mind that the virtualization I've created is through the free VMware Server software, which enables virtualization, but at the expense of adding two software layers to the normal BIOS and OS equation. I would expect that using VMware's license-based Hypervisor will close, if not eliminate the performance gaps experienced using VMware Server. The fact that there is some performance degradation is understandable, considering the virtual machine must go through additional processing to gain access to the physical layer.
Further, I ran my tests using different hardware platforms, with a 3.2 GHz CPU (Intel Prescott 3.2E) on my virtualization platform, as opposed to a 1.8 GHz CPU (AMD 3000+) on my physical platform. If anything, the virtualization platform should have had an edge in processing capability.
Nevertheless, free virtualization software merits strong consideration, despite its performance disadvantage. The reduction in power consumption, noise and heat generation, and space consumed by multiple physical boxes is certainly a positive outcome of virtualization. Further, the flexibility of creating multiple networks to support both virtual and physical traffic is a useful option for managing traffic flows and network capacity.
Overall, even with the slower performance of the virtual machine, I'm going to dismantle my physical FreeNAS appliance and re-install its RAM and hard drive in my Host server, free up the shelf space, and minimize the amount of cash I have to send to my electric company.