WordPress 2.8.4 Running Slow after Upgrade from 2.6.5 – Recommendation needed

I have just upgraded my wordpress site from 2.6.5 to 2.8.4
The site is running very slow even with hyper cache running.
The site has 30,000 posts and the database size is 200mb.

I am running the site on a VPS server (Cpanel) with 512 MB RAM guaranteed, ram burst to 1024mb.

When I was running wordpress 2.6.5 the site use to be slow if I had alot of users, but now it seems without the users it is crawling.

Is wordpress able to handle this many posts and this big db size?

I would appreciate your recommendations, feedback as to what I should or can do?