According to Thurrott, WinFS will be in Longhorn Server and will ship for Longhorn client within 90-120 of the client release.
http://winsupersite.com/faq/vista.asp
Q: Will there be a server version of Windows Vista?
A: Yes. However, it's likely that this product, currently codenamed Longhorn Server, will be called Windows Server 2007. It will definitely not be called Windows Vista Server. Longhorn Server is being developed concurrently with Windows Vista, but will ship 90-120 days after Windows Vista.
Q: What is WinFS?
A: WinFS is a relational database-based data storage engine that Microsoft is building on top of SQL Server 2005. Originally scheduled for inclusion in Windows Vista, WinFS will now debut in Windows Server 2007 ("Longhorn Server") and will ship separately in 2007 as a free add-on for Windows Vista.
Microsoft considers WinFS to be a "product update" for Windows Vista. As such, it will be considered part of Windows Vista when it ships in 2007 and it's likely that future Windows Vista versions will simply include this technology out of the box, in the same way that today's boxed copies of Windows XP include Service Pack 2.
Q: Why isn't WinFS going to be included in Windows Vista? Doesn't that make this release less exciting to end users?
A: In August 2004, Microsoft announced that it would not include the WinFS data storage engine in Windows Vista, but would instead ship that technology in beta form when Windows Vista debuted in late 2006. Microsoft still has tentative plans to include WinFS with Longhorn Server, and will likely ship WinFS for Windows Vista when Longhorn Server ships in 2007.
Even though Windows Vista will not include WinFS, it will still include virtually all of the end user search features that Microsoft had originally promised. Microsoft describes this feature--which is essentially instant desktop search--as "Find My Stuff." According to the company, the inclusion of WinFS will make Find My Stuff even more powerful. But as I'll demonstrate in my Windows Vista Beta 1 review (available August 3), the instant desktop search functionality in Windows Vista is still quite powerful, and arguably superior to similar features in Mac OS X 10.4 "Tiger" or Windows add-on products such as MSN Toolbar Suite with Windows Desktop Search (see my review).
Q: Will WinFS be ported to prior Windows operating systems?
A: No.
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Q: I heard that Office 12 (the next version of Microsoft Office) will ship concurrently with Windows Vista. Will Office 12 only run on Windows Vista?
A: No, Office 12 will also run on Windows XP with SP2, Windows XP x64 Edition, and Windows Server 2003 with SP1. However, Office 12 will include Windows Vista-specific features that take advantage of Vista's incredible display and searching functionality.
Q: When will Windows Vista ship to customers?
A: Microsoft is targeting the second half of 2006. At this time, Microsoft will also ship Office 12.
Q: When will Longhorn Server ship to customers?
A: 2007. At this time, Microsoft will also ship WinFS for Windows Vista.