Wierd VM behavior

My Windows 7 virtual machine, which has 2GB of RAM allocated to it, is extremely laggy, to the point that opening a folder will take minutes. Surprisingly, it became all smooth and quick when I decreased its RAM allocation to 1GB. Intrigued, I used Process Explorer to look at some of its stats.

Win7 VM with 2GB of RAM

When the VM had 2 GB of RAM, its CPU usage is mostly zero. In addition, even when idle, it's performing about 200 Page faults per second.

Win7 VM with 1GB of RAM

When the VM had 1 GB of RAM, it used 1.2GB for its working set, the CPU is hard at work, and page faults are close to non.

Wierd... I have no idea why.