Hyper-V - no question here.
Not becasue of performance but because all viretualization is fully integrated and maintained as part of windows updates. No need to install anything unless you run outdated windows versions.
That said:
HD 500 GB
Welcome to the reality of virtualization. It does not makgically make crappy hardware faster. A 500gb HD is not good to run visual studio - unless if is a Velociraptor - because it will be slow. Running multiple computers on one such hard disc is like saying "hey, my Fiat Panda is too slow when i load up 2 tons of stuff into the trunk". HD overload is a likely cullprit. Possibly also the crappy RAM:
RAM 8 GB
Yes. That is crappy. Really. See:
I have observed poor performance when simultaneously using visual studio in four windows
instances
Let me be clear - 4gb PER VM is too low to run Visual Studio properly (with debugging etc.). Cramming 4 such instances into what is less than 2gb physical memory per Computer (as a VM is a computer) is asking for trouble.
That is totally not related to the virtualization technology. You simply need to put (a) an SSD into the thing (or an array of faster discs) and (b) put enough RAM into the server to run the workloads you want to run.
It gets worse when you see:
I have created 4 windows xp guests with 512MB RAM and 1VCPU
What about you run VIsual Studio on a physical computer with 512mb RAM. HINT - IT WONT WORK FAST. 1VCpu - bad, too low (I dont allocate less than 2 virtual CPU's these days) and seriously, 512Mb RAM for something as ressource hungry as Visual Studio. WHOOOOOA. WAAY too low.
Try 4gb per VM. And a fast disc subsystem.