Since in a comment you said that you have a table with 1 millon registry, its possible also you need to improve query and not only hardware.
If i am in your situation, I will buy new hardware if that is possible and also check the slow queries.
Also I think it would be good idea to avoid windows if you use mysql. Few years ago, I used win2003 with mysql, but when I migrate to linux (host only running mysql service) The performance gain was a lot.
At respect to hardware (low cost budget):
This is like a "home" o "small" setup, for 20 connections.
4gig ram minimum
quad AMD (Its a lot for 20 connections at same time,but that computer could run other services also)
And of course some RAID setup (you should investigate this)
Remember to buy good motherboard.
If you are going to buy server hardware, I really dont know anything about this...so sorry!
But, i really think that you have problems with querys!
At home, i am running a core 2 duo, with 3gig of ram. Its running 20 openvz container with 4 web pages (like 15 connections at same time) and a lot of bots crawling internet (this makes like 1000 querys a second to mysql databases) and I dont have any performance issue.
Of course, if I had any slow query...well the thing changes a lot about performance.
Harddrives are sata, not using RAID!
Of course I am running linux.
hipe it helps