Virtualization provides levels of execution isolation and service partition that are desirable in many usage scenarios, but its associated overheads are a major impediment for wide deployment of virtualized environments. While the virtualization cost depends heavily on workloads, it has been demonstrated that the overhead is much higher with I/O intensive workloads compared to those which are compute-intensive. Unfortunately, the architectural reasons behind the I/O performance overheads are not well understood. Early research in characterizing these penalties has shown that cache misses and TLB related overheads contribute to most of I/O virtualization cost. While most of these evaluations are done using measurements, in this paper we present an executiondriven simulation based analysis methodology with symbol annotation as a means of evaluating the performance of virtualized workloads. This methodology provides detailed information at the architectural level (with a focus on cache and TLB) and allows designers to evaluate potential hardware enhancements to reduce virtualization overhead. We apply this methodology to study the network I/O performance of Xen (as a case study) in a full system simulation environment, using detailed cache and TLB models to profile and characterize software and hardware hotspots. By applying symbol annotation to the instruction flow reported by the execution driven simulator we derive function level call flow information. We follow the anatomy of I/O processing in a virtualized platform for network transmit and receive scenarios and demonstrate the impact of cache scaling and TLB size scaling on performance.