Ideally you would use the full version of SQL Server, but I have had a dozen or so sites (a mixture of ASP.NET and classic ASP) on a dedicated Windows Web Edition server with Sql Server Express and 512MB or RAM running happily. Altogether, they probably served up anything up to 20,000 page requests a day.
As to why your current setup crawls, no one can answer without knowing what else the box is repsonsible for, what your code is like etc etc.
I wouldn't use DNN, by the way.....