Summary: I was a beta user of this software back in June 2007. I eventually purchased the RTM (release to manufacturing) version when it came out. It took a while for me to install the official version, as I was afraid to "break" anything! Whatever you do, install from bootup, and not within the WHS console. There is a reinstall option, which will overwrite the System partition of WHS, but leave all of your data intact. It worked fine for me, though it does take a while to fully install. Depending upon your motherboard and which hard drive you are installing WHS on, you may need to enter in order to properly load the drivers for the hard-drive controller. This is poorly documented, but extremely important for a successful install! Be sure and put the drivers on a floppy or flash drive beforehand.
When building my system, I used a budget motherboard with on-board video, a Pentium 4 CPU and 1GB RAM. I started with a 750GB SATA drive for the main drive, but have added on since then, as I now have five drives in my system (two previously used PATA and three SATA). The nice thing about building your own server is that you can add more drives as you like, and re-use older components as the system requirements are not all that high.
I will say that the RTM release (the version you buy) is more stable than the beta version. The only problem I've had is with one Windows XP Media Center computer not being able to back up. I did some tweaking, and finally got it to work.
Once the WHS is up and running, you install the "connector" software on all the Windows PCs in your home network (be they wired or wireless). This allows the PCs to communicate with the server. You also have the ability to login to the server from any of these PCs, and perform system setups like configuring backups, media shares, user accounts, etc.
The nice thing about WHS is that it automatically goes out and performs a backup every night on all the connected computers (if you have backups turned on for that PC). Even if the computer is in sleep/hibernate, WHS will wake-up the computer, perform the backup, then put the computer back to sleep. Very cool! If the computer is turned off, it will skip the backup for the night. The first backup takes some time, but those afterwards are fairly quick, as they are incremental. If a PC crashes, there is a recovery CD that should put that PC back to it's original state, or you can recover individual files.
I also use WHS as a Network Attached Storage (NAS) solution. I put all of my pictures, videos, music, etc on this box, and can share it will all my computers on the network. In addition, you can remotely login to the WHS box from the internet, and access those same files, or even remote-desktop to any computers on your network (assuming that those computers support remote desktop).
WHS does not use RAID, but instead does mirroring. It will duplicate the data on two different drives, so if one drive fails, you don't lose you data. If both drives fail, well, you are out of luck! ;-)
Thus far, I am quite pleased. I was happy enough with my WHS box that I have sold my Infrant ReadyNAS box.
The main knock I have on this product is that it is so darned expensive! This should really be priced at around a hundred bucks.
If you don't want to mess with your own DIY installation, there are quite a few companies selling pre-configured WHS boxes. They will ultimately be more expensive, but will be easier to setup.