I've been running the setgenerate command with one less core than I have available. So on my eight core i7 it is "setgenerate true 7"
It seems to be performing very well that way, and is a necessity since I am also running cgminer on the same computers and need to leave a core available to it so it performs properly.
ericwt, are you using primecoin-qt v.0.1.1?