"Extremely large harddrives.. [1 TB]"
Hate to break this to you, but so can a workstation.
"Large amounts of RAM [32 GB]"
2GB is barely used. You can go to 3GB and even 4GB depending on the motherboard. You won't utilize more than 4GB for the life of the system anyway, so once again, unnecessary.
"Fast LAN Speed-10/100/1000MB/s"
Most motherboards include onboard gigabit NIC's now, sometimes even with two, so that's irrelevant.
"The only processors available are above 2.8GHz or so..."
Clock speed isn't the be all end all of performance. And even if it were, you can get CPU's for workstations over 2.8GHz.
I'd rather have 16x PCIe than any of the above features that a workstation motherboard can't do, and as you can see, most of these things a workstation board can do.
Not to mention Xeon CPU's are meant for server type apps such as messaging, database, etc. I should know; I am a Microsoft Certified Systems Engineer (MCSE), I design enterprise level network solutions, so I love Xeons for that kind of thing.
So yes, it is retarded to use a server for gaming.
"How many squirrels had to die to make you look fly?!"