Improving SQL Server performance on VMware under Linux
I had a similar problem. Virtual disks kill performance. Try to get as much data into memory as possible. I eventually put the disk intensive VM's onto its own RAID stack.

Most people in OIT do not recommend putting disk intensive applications into a VM because of this reason. You also didn't specify which VMWare product you are using. ESXi was released for free not to long ago, if you are not using that you may want to try it. It may help you get that last bit of performance you need.