These days, commodity-off-the-shelf (COTS) hardware and software are used to build high-end and powerful workstations and servers to be deployed in today's local area networks of private homes and small- to medium-sized business. Typically, these servers are multipurpose and shared - running networking functionalities involving IP packet forwarding in addition to other CPU intensive applications. In this paper we study and investigate the impact of running CPU-bound applications on the performance of IP packet forwarding. We measure and compare the impact and performance for the two operating systems of choice for home and small-business users, namely Linux and Windows XP. The performance is studied in terms of key performance metrics which include throughput, packet loss, round-trip delay, and CPU availability. For our measurements, we consider today's typical home network hosts of modern processors and Gigabit network cards. We also consider different configuration setups and utilize open-source tools to generate relatively high traffic rates. Our empirical results show that Linux exhibits superior performance over Windows XP in terms of IP forwarding performance. Results also show that, unlike Windows XP, the IP forwarding performance of Linux is not significantly impacted by running CPU-bound applications.