Server setup - Feedback wanted

So about a year ago, I decided that I might as well put together a nice little machine and throw on the wonders, which is the new Windows Home Server. It has worked OK, but I'd like to have a bit more control.

Recently I have realized how much I seem to mess up my visual studio environment. It's rather annoying, seeing as I have to reinstall my machine every time that happens. So why not go ahead and put it on a virtual machine, on my server? Then I can access it from outside of my house too!

Anyways, here's my specs:

ASUS M3A-H

AMD Phenom X3 8450 (2.1GHz)

4gb of ram

3x Seagate Barracuda 7200.11, 500 GB, 32 MB, SATA II

So my main objective of this machine will be to serve media and files between my machines, take backup of my family's machines. And host a few virtual machines.

So now I get to the first problem: Should I install Server 2008 instead? I have a feeling it will perform better and is generally more recent, etc.

My first impression is YES! That leads me to my second problem: WHS has this nice drive pooling options. I like redundancy, but when running a virtual machine, I'm going to assume that drive performance is a pretty good idea to have, yeah?

So given these 3 drives, how is the best drive configuration? I'm thinking 2 in RAID1. Maybe get an identical drive  and do RAID1 with all of it. What will give me the best performance and redundancy?