We had a similar situation, once back, and we tried to move a 32-bit application (Tomcat-based J2EE application) to a 64-bit machine. We are witnessing the consequences that you face.
By the way, you did not mention why you switched to 64-bit OS :).
Take your questions one by one
Whether the 32-bit application in environment 64 will launch additional processor / memory, creating a problem here.
In general, yes. But it also depends on your processor architecture. To understand this, see how Windows runs a 32-bit application on a 64-bit machine. A 64-bit OS has a subsystem called WoW64 ( 32-bit version of Windows on a 64-bit version of Windows )
There are basically two ways: WoW64 does this
32-bit command emulation. This computation is very expensive and is likely to cause a surge in processor usage. This usually occurs when used with Intel Itanium (IA-64) processors.
Switching the processor to 32-bit mode from 64-bit mode. Here, when you need to execute a 32-bit application stream, the processor switches to 32 modes (compatibility mode), and then switches back to 64 bit mode. This is relatively faster than the previous emulation engine.
Is there a performance difference between Win 2003 and Win 2008.
This is very subjective. It depends on the type of equipment you use. Even if you have a 64-bit OS and hardware, a lot depends on the type of hardware, the processor of the motherboard, etc. The 64-bit OS is designed to use superior equipment that the 32-bit OS and the machine cannot due to limitations, such as addressing space, etc.
Does Windows 2008 support a larger number of processors compared to 2003 because of the 64-bit environment?
Yes. like @EJP mentioned above, he has more things to offer . A more reliable OS will require superior hardware. Perhaps your particular application may or may not need any special Win 2008 features. This is the reason you need to call, why you need to switch to 64-bit with 32 bits. Here is a similar post on the same forum.
BTW I'm not sure if you have an option, but you can run the same code without rebuilding (if you do not use any libraries of a specific platform) on a 64-bit Cat.