Windows servers are not designed to handle much more then 8 users at the same time. If your server is popular and you want to keep it this way you should switch to Linux.
The wide spread horror stories about windows servers has convinced me that windows is nice to work on at home but never a good platform for running a Palace server. Its why we started the Palace on Co-Linux Wiki pages:
http://palaceplanet.net/wiki/
Sorry but the only solution I can suggest for this problem is move to Linux.
