Question : SQL 2005 Performance drop

Circumstances:
I have an SQL 2005 SP2 server, Database is about 1Mio records, Dual Xeon, Win2003 server, 4Gb RAM. DB is consistent, has indexes, is optimized etc etc. Server is is bombarded with simple SQL queries (2queries/s).

Problem:
One or twice a day, server performance REALLY drops to dead slow. Problem is, that even SIMPLE SQL Queries take from 0 to 8 seconds!  Sometimes it recovers, most of the time it doesnt and HW reboot is required. We've tried every tuning options that is, replacing server, reinstalling systen...nothing helps. What could be causing this and what can I try to solve it?

Answer : SQL 2005 Performance drop

>disk is going araund like crazy.
can you check if "paging" is happening at the same time?
if it is, your memory config is no appropriate

what edition of sql server 2005 are you actually using?
select @@version

finally, does your database use several filegroups, and have the index(es) of the tables in other filegroups than the tables themselves (except the clustered index, which is the location of the table, actually) ?
if now, you should implement filegroups, and get your table(s) and index(es) moved to different filegroups.