Application running slow when querying against SQL Server 2008R2

I'm having an application that is starting to run really slow when inserting and querying data from a SQL Server. The database is on a dedicated virtual box with 10 GB ram, AMD Operon 6134 processor (4 threads).

The database is no more than 9 GB large, and is set to Full recovery with a proper backup routine.

I'm fairly inexperienced as a DBA, and not the best at finding locks and deadlocks so some pointers would be appreciated.

The database is pretty old, and everything column is nvarchar, even the keys. How big an impact would this have on the application? It is a small database so would this really matter?

There are only 5-6 people at any one time updating, reading and inserting less than 100 rows, so would changing to simple recovery mode have any impact? Log file is currently at 1 GB.

Log backup every 15 min, differential backup every 3 hour, full backup every 24 hour.

Any pointers would be appreciated.