To build this server into a VPS Node you will need much more than 2 GB of RAM.
Now as to what you can use to virtualize your server, there are a wide range of products that you can choose from -
Xen, KVM, OpenVZ, and Virtuozzo are some of the basic virtualization platforms. You can also use VMWare and OnApp, but that is a bit high level and I believe would be outside your need at this time.
Since you are using a lower end server I would suggest one of the OpenSournce solutions so that you can install it, mess around with the application to get a feel for it. The great thing about the OpenSource ones is, if you don't like it delete it and try a new one.
Your dedicated server itself looks only as big as a decent vps would be. I would suggest you at least add more ram to it. Though if you really want your server should be ok with creating and running upto 4 small sized vps s on it. (Depending on what you gonna use each for and how much resource each will need).
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i like virtualizing because it makes it easy to reboot a system without bringing everything down. also in the future it helps for expanding. way easier to move the VMs over to a faster machine in the future if he upgrades.
You want to make sure you have enough physical RAM to cover the allocated virtual RAM you are using at first. Larger VPS Nodes can get away with overselling as they should not be clocking the entire memory usage 100% of the time, but for smaller Nodes it is easier to get to that overload point. So with 1-2 VPS make sure you can cover the virtual memory with physical, and 1-2 for your OS and you should be good to go and grow for a bit. Then just add more resources to the Dedicated Server and then expand your virtual limit and your good to go