It will depend upon the RAM and space allocated to each VM. You can create 20 VM's of 1 GB each and keep 4 GB RAM free to manage those VPS's and manage the load of the VM's in case of sudden increase of load in any VM or during spikes. Keeping some RAM left on main server will ensure better performance for the VM's created, so other VM's are not affected if any VM's uses more RAM than allotted.
It will get I/O bottlenecked very quick with 2 drives. Long before CPU or RAM is exhausted.