Ever since then, the performance of
the site has dropped?
Häh? You did that on your server. You should KNOW whether the performance dropped or not. Afte rall, you are the guy with access to your own servers logfiles and performance counters.
Does the .asp files get compiled
before it served by IIS?
Since ASp is not a language to start with, it is not compiled. The language in question (possibly / likely VBScript) is handled by the Windows Active Scripting Host... and for the major languages (you can have various)... this is not compiled. I could be, but I know of not a single compiled language.
What server version are you using?