I would definately look into tweaking the app....

from your performance monitor something is definely thrashing your harddrives

either set up a seperate array for the application (usually done with sql apps)

system and regular data are mirrored and the sql is in its own RAID array...on a seperate controller

Ask the vendor....they must have some recommended guidelines....if not...threaten to change applications...that usually starts the wheels rolling.

MLF