Here are some more details on my problem:
I killed most processes on the plug and tested with hdparm:
hdparm -tT /dev/sda4
/dev/sda4:
Timing cached reads: 62 MB in 2.01 seconds = 30.92 MB/sec
Timing buffered disk reads: 4 MB in 3.69 seconds = 1.08 MB/sec
I updated the kernel from sheeva-2.6.32.7-uImage to sheeva-2.6.34-uImage and hdparm gives the same results. I got the kernel from
http://sheeva.with-linux.com/sheeva/