I had a feeling this might come up, I did make a comment orginally in my post about this, but removed it before I posted. I didn't want to bring the argument up as it had nothing to do with his issues.
Read whitepapers such as the Intel one, emails from devs themselves of the multiplayer code of the source engine, etc etc, and you'll find that its a placebo effect. Hell, Intel used pro gamers in its virtualization tests(CS 1.6 was used in the tests), and no one found ANY difference.
As you said, its wanted for ladder play, and that is true, but its not needed. The ONLY time this issue would effect anyone is if your a game server reseller, as, placebo effect or not, most people(ladder players especially) out there are willing to pay extra for for 1000+ "hz"(fps) servers. If I was a reseller, if people are willing to pay extra for snakeoil, I'm not going to argue! :smileylaugh:
I'm not going to delve any deeper into the topic, if you disagree, then lets agree to disagree. The point in the end stands, if your virtualizing game servers, you SHOULD NOT play around too much with your game server "hz"(fps). It will ultimately detremental to the vm's performance.