I'm currently hosting a local vanilla Minecraft server for me and my friends off an old 1U server I got for $20. It's got two Xeon 3066DP procs and 3GB of memory. I haven't had a problem at all so far. I've had upwards of 10 friends on simultaneously. I'm not too seasoned on hosting, but I thought I'd let you know that even on low-end hardware it runs like a champ.