Well, it of course depends how busy is your service.
For all our tests set 100MB of RAM to use by the server. The tests are quite heavy. They open 1000 concurrent connections to the server, connecting and disconnecting a few times a second sending as many messages per second as possible. These tests cause very high load on the CPU but they are actually a bit unrealistic.
Average service for 1000 active user accounts using external SQL database should work just fine on P3 700MHz machine with 100MB of RAM available just for Tigase server.