Sakis:
Normally, DNN does not require a lot of horsepower to run decently. High traffic sites is something else.
Now, you mention that you have a separate server for SQL. That may be the culprit. Because of the nature of how DNN works (it reads all the content from the DB), you need to look into what is going on with the SQL server, you know, the usual, CPU utilization, memory, processes, etc. Also, and I have seen this happening, when routers and switches are misconfigured, the traffic from box A to box B may be taking a route longer and/or slower than needed even if the two boxes are in the same room. And this can get really tricky to diagnose, you may need the help of a comms guy. You can at least do a tracert from the Web server to the SQL server to see how many hops there are from one box to the other (and then the other way around to see if the returning traffic is taking the same path). Also, in the Web server, are you addressing the SQL Server using its DNS name or its IP address? If you have one try the other.
The things above are usually issues in big organizations with complex setups, I don't know if they apply to you, but those are things that you must keep in mind, it is not all DNN itself. Remember that DNN itself, and ASP.Net for that matter, perform very well with much less power than what you have.
Carlos