Centos – Production server has 16GB of RAM and a 32 bit OS. Replace with 64 bit OS

Most modern 32-bit CPUs support PAE which allows them to address more than 4GB of physical memory, although a single process can only see 4GB at a time. The kernel will take some of this address space. This Stackoverflow post discusses how PAE works.

Many operating systems (including Linux and MS Windows) offer an API that allows you to manipulate the MMU and page overlays in and out of the virtual address space of a process. This facility allows you to use extra memory for disk buffers. However, as far as I am aware the only DBMS platform with direct support for this is MS SQL Server.

Additional memory will improve your database read performance (which will probably improve your overall throughput), but write performance will be constrained by I/O. If you have a low DB cache hit rate (say less than 95%) then additional memory will probably improve your overall throughput. Otherwise, you may need to look at your disk subsystem (see 1 below).

Assuming you need or can benefit from more memory, the best approach is to move to a 64 bit platform. A modern Xeon or Opteron server will let you install up to 32-144GB depending on the model. This is likely to be your best option.

1. SANs are good for transactional applications. For a high-volume application you should have write-through caching on the DB logs but you may be able to get away with write-back caching on the data volumes. This will get you good log-reader performance as the random data writes can be absorbed by the controller's battery-backed cache and the controller can optimise disk writes to improve throughput.
   
   However, this arrangement has failure modes that can leave the data volumes inconsistent (corrupted). Using write-through on the log volumes mitigates this (as the logs are not vulnerable to these failure modes). Practicaly this limits you to a restore/roll-forward recovery model, so it will only work if you can tolerate a (say) 4-hour recovery window.

You have a server with 256M, but you can't use all of that -- remember there's some OS overhead. Add to that with the fact you're over committing as other folks have mentioned and you'll definitely thrash here. 256M is only enough for a small DB, 20 connections is a lot with what you've got configured.

1) reduce your max connections to 4 (you're using 3 out of 20)

2) optimize your query cache better; 8M is really large, and 64M total is a lot based on your hits/prunes; try a 4/32 combo and see how it goes. Really I think a 2/24 combo would work for you.

3) you have no sorts requiring temp tables, why is that max_heap_table_size verb in there? Comment that out, use the defaults

4) do you actually have 128 tables? Try cutting that table_cache in half to 64 or 48

5) reduce thread_cache_size to 4

6) optimize those tables to reduce fragmenting

Those are some things to start with. It looks like you threw a bunch of numbers in a config without any actual profiling to know what you needed and have created a mess; if all else fails go back to the defaults and get rid of your custom settings and start over using some performance tuning guides you can find on Google. Get the output of SHOW VARIABLES and SHOW STATUS, find any one of a bajillion tuning guides and plug in your actual, real numbers into their equations and that'll tell you the exact-ish numbers you need to put in your config file.