It's working fine with 2.6.24-17-server. Even with udma2 selected, the 
responsiveness is great.
The one difference is saw in the config of generic and server kernel that might 
me affecting is this

CONFIG_DEFAULT_IOSCHED="cfq"
CONFIG_DEFAULT_IOSCHED="deadline"

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Heavy Disk I/O harms desktop responsiveness
https://bugs.launchpad.net/bugs/131094
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