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Upgrading Server - Opinions Needed

One man IT shop here and sometimes I do miss necessary meetings and input from others. We are aiming to upgrade our existing server or getting a new server to comply with the pending end of life with Small Business Server 2003 in April.

First up, I've used and tested (Thanks TechNet...wish you would stay) Server 2012 and I like it so I want to go with it. It will replace our SBS 2003 and be our primary domain controller.

I didn't set this server up and it has had a host of quirks that I've put band aids on over my 3 years here. Really looking forward to a new, clean system.

Our current server is this:
PowerEdge 2900 (tower)
Intel(R) Pentium(R) III Xeon processor 2.3Ghz, 12288 LS Cache
4GB Useable RAM (has 8 but only on a 32 bit OS)
160 GB C Drive
1.5 TB, 8 Drive RAID set for our D Drive

The server is getting long in the tooth for sure but I don't get a lot of money to spend, so we may have to upgrade the server.

Plan 1 (Upgrade Current Server)

This plan is with the help of the vendor I got the upgrade quote from. It was a decent price (according to management)

Virtualize Windows 2003 server onto temporary Server Provided by vendor.
Install Memory Upgrade (going to 16GB) and Reconfigure Raid configuration for larger C partition (adding new hard drives)
Install Windows 2012, install all updates and drivers and Join Windows 2012 server to Domain
Promote Windows 2012 to Domain Controller to begin syncing of user accounts off Windows 2003 server
Copy all files shares and permissions and Setup New shares on Windows 2012 server
Demote Windows 2003 server Remove all features and shutdown temporary server
Verify server is free of errors and is performing to spec

This will most likely be our plan because the owner just wants to spend the bare minimum often times.

What we really want is more redundancy but we know it will cost. So, here are my questions for a "Plan 2" in hopes management will want to spend the extra money for more uptime promise.

Virtualization or Clustering?
If virtualization, VMWare or Hyper-V? (I am rusty with my VMWare and Linux, would prefer a Microsoft system.)
Can mismatched server specs still be used for redundancy if we go with Virtualization?
How do the files transfer over in the need to run from the backup server? Manual copy? A script that kicks off during a roll over?

Thanks everyone in advance!


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