Virtualization is a key technology to enable cloud computing. Driver domain based model for network virtualization offers isolation and high levels of flexibility. However, it suffers from poor performance and lacks scalability. In this paper, we evaluate networking performance of virtual machines within Xen. The I/O channel transferring packets between the driver domain and the virtual machines is shown to be the bottleneck. To overcome this limitation, we proposed a packet aggregation based mechanism to transfer packets from the driver domain to the virtual machines. Packet aggregation, combined with an efficient core allocation, allows virtual machines throughput to scale up by 700%, while minimizing both memory and CPU consumption. Besides, aggregation impact on packets delay and jitter remains acceptable. Hence, the proposed I/O virtualization model satisfies infrastructure providers to offer Cloud computing services.