max number of connections

We have a database Server Configuration:
4GB RAM
600GB Hard Disk
Xeon Processor 1.3 Ghz.

We are barely able to have 100 concurrent users!!! What are we doing wrong.

I know I need to configure mysql_query cache, mysql_limit_size and table_cache. But what should be the formula, and how do we go about checking the same.

Below is the details of our my.ini file.

[mysqld]
datadir=/database/data
socket=/var/lib/mysql/mysql.sock
set-variable=max_connections=2000
set-variable = max_allowed_packet=64M
default-storage-engine = innodb
log-bin=/database/data/mysql-bin