Could anyone please tell me the best way to monitor CPU usage and system memory utilization, I know it can be done with the server monitors and ofcourse i have gone through the user guides but somehow things are still not clear to me.
You can use the Windows or Unix Resources monitor to capture CPU usage via LoadRunner. Set this up before running your test and this can be viewed while the test is executing and correlated with other metrics such as response times after the test has finished executing in the Analysis tool.
The online documentation explains how to configure each of the available monitors.
The other alternative is to use some external monitoring tool such as 'perfmon' on windows or 'top' or 'vmstat' on unix.
I'm assuming that you have either the Windows or UNIX resource monitors available (or both) to you under the terms of your license agreement with Mercury?
Basically you configure the relevant monitor via the LoadRunner Controller (you don't need a seperate machine for this). You can monitor more than 1 piece of hardware at a time using the same monitor, so you should be able to monitor each machine for CPU usage etc during the execution of your load test.
These metrics can then be overlayed in the analyis tool once your test has finished with others such as transaction response time.