I used to use them as hardware for a test and development OpenStack cloud. On a decent spec'd Z620 I could simulate a full OpenStack cloud, and even boot quite a few VMs inside it for end to end testing.
Do you generally run openstack on host OS itself or within VM? Or to clarify - I have noticed some problems when Openstack runs inside virtualized environment, but if it directly runs on host OS itself, it seems to be fine.
With OpenStack it is generally recommended to run it on bare metal boxes. Likely, the issues you're running into are network based (or running an SDN over an SDN).
Virtualised control plane is totally fine. Next step is containerised OpenStack.