Thanks! I have noticed significant increase in speed as well for my local windows 7 environment.

Question: does this solution also work/apply to Linux VPS environment? or is this specific to local windows environment?

This is a Windows environment problem in general. Later versions of windows have localhost disabled in their host config requiring it to look it up over the DNS every time. If you look in your host file you should see something like:

#   127.0.0.1       localhost
#   ::1             localhost

Remove the # in front of it and everything should be speedy even if you use localhost instead of 127.0.0.1.