12.04 dropping packets on static but NOT on dhcp

I've got 12.04 installed as a guest on KVM bridged (Proxmox VE 3.0). If the guest network is setup as DHCP there's no dropped packets. As soon as I changed to static address the guest starts dropping packets. 5% to 10%. I understand some dropped packets are not generally a problem and on our local network there's no noticeable impact. However, we do have some routed traffic coming in from the Internet (HTTP/HTTPS) that accesses this guest and those browsers and equipment have substantial difficulties making the connection. I don't understand what the difference could possibly be between static and DHCP but there is definitely something.

interfaces:
----------------------------------------------------
# The loopback network interface
auto lo
iface lo inet loopback
# The primary network interface
#auto eth0
#iface eth0 inet dhcp
auto eth0
iface eth0 inet static
address 192.168.1.87
netmask 255.255.255.0
#network 192.168.1.0
#broadcast 192.168.1.255
gateway 192.168.1.1
#dns-search coosbay.cardinal-services.com cardinal-services.com
dns-nameservers 192.168.1.4
----------------------------------------------------

Any thoughts or direction would be greatly appreciated.
Rois Cannon