If it is a Citrix only server (as in doesn't provide other services such as Web Interface etc) - then certainly go with the "Programs" performance setting. "Programs" as you could imagine is intended for when interactive users are running programs on the system (which is exactly what TS users do), whereas "Background Services" is tuned more for running services such as SQL, AD, IIS etc.
When you select Background Services, higher priority is given to the operating system.
When you select Applications, higher priority is given to user mode programs.
(www.brianmadden.com/forums/t/11518.aspx)
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