What is more important?
 

I am planning on building my own webserver and have a preference question for all those who have done it before. Is it more important to have a blazing processor or plenty of RAM to pull the server load? Which one would be more beneficial in the long run?

I would try and make it as equal as possible. 1GB of ran should be plenty of ram for most single processor servers. I would use 2GB of ram if you plan on being MySQL heavy. If your going to run dual processors I would recommend a minimum of 2GB of ram.

What if I was planning to run dual 3.8 Xeon Processors? How much Ram would you recommend to run best. I was planning 4GB but is that going to be enough?

4GB of ram would be plenty. And you can always ad more ram to it latter if you need to. I see you plan on building one mean machine. ;) What are you going to do with all of that processing power?

I plan to have a blazing webserver for a shared hosting company. I want my clients to be uninhibited by any lag or slow loading times. I also want to be able to host a few more accounts then normal on one server. And as I see it this server will be my pride and joy for a long time :D

It really depends just see what bottlenecks you. Seeing as its easier to upgrade RAM if its a bottleneck i would pick Processor as being more important