I thought I should share how we did this? In short we got a lot of help and used VMware...
Chris Bradfield (chris at scribe dot net) started the project and identified ZeroLag http://www.zerolag.com/ as our new hosting partner and Michael Bell (mbell0218 at gmail) as our consultant to perform the VMWare integration
Greg Strelzoff is the CEO of ZeroLag and I have to say he has been a great partner, he has repeatedly found ways to help us reduce costs as well as freely helped connect us with other companies who we might be able to do some partnerships with
We were able to successfully virtualize 35 services that previously required the same amount of physical hardware into six VMware hosts running the Linux kernel with VMware server on each. The combination of ease of management, resource utilization, and ultimately MRC savings speaks well of the concept of virtualization. The additional benefits of moving to this model were clearly recognized when increased traffic levels required additional web services, which were built, tested and deployed within days instead of weeks. The reduction of physical servers also allowed savings in rack space and power usage.
I really cannot say enough good things about Michael Bell and ZeroLag. They have been fun and friendly to work with even coming over onsight to help us with the integration, and again I must stress saving 90% off of your fixed recurring costs has been a tremendous savings.