Server configuration for DNS

What would be an ideal server configuration to handle a dedicated DNS (primary/secondary at different physical locations) for a small sized webhost of around 500 - 1000 zones?

Does anyone recommend using a VPS/VDS? How large a DNS would a 256 MB RAM (512 MB Burst), 5 GB storage on a Dual Xeon 2.66 VPS be able to handle before need to look at going dedicated?

 

 

 

 

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