Definitely dedicated. I would recommend a load balanced set up, something similar to this:
2 Web Servers:
P4 3.0Ghz Processors
1GB Ram
200G SATA Storage
Dual Nic Cards
Upgradeable to 24 Servers
A single core P4... seriously? Fuck that might as well go with an Atom at that point or spend just a tiny bit more for a Core2Duo given how far we've come from the days of a P4.
And where did you cut/paste that from (based on the bolded part). Basically link-fail since you didn't include where that setup was and how much it actually was.