it is likely more to do with it being a VPS and not a dedicated server.
In review of your specs (2.7GHz + 1GB) that is a VERY small platform for hosting anything other than a website (which is what most VPS's are designed for). That would be like running the server from a laptop and expecting optimal performance.
This isn't to say its NOT doable, but it is not optimal.
This also has nothing to do with Linux or the emulator. VPS is a Virtual machine running typically with other Virtual machines on the same hardware. If all Virtual machines are processing at the same time there is a distributed lag (for lack of better words); which would not affect things like a web server but would affect an emulator.
To get optimal performance you should have a quad processors and 2-4GB and it should be dedicated.
Hmm, I'm not sure if you understand VPS entirely. Yes there are multiple guests sharing resources on a host system, but the resources for example '1GB Ram' is fully dedicated to that single VPS, it's not shared.
So if you setup 8 virtual servers on a 16GB Host and give 2GB to each vps, they are bound to that limit.
The only difference between dedicated and vps is one uses it's entire resources and the other is split up in resources.
I know I'm a bit off topic here, I just though I should address it, because the problem is not that it's a VPS. I'm pretty sure it's because it's only 1GB and on a reseller.