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Im going to be setting up a network for a small business. This is my first time setting up a network of this size. (7 users and 3 dumb terminals) I plan on using MicroServer03 as the server OS. Can someone please make some suggestions as to what i should use for hardware and software to set this baby up with.

First off, ignore the inevitable "you don't know what you're doing you should hire a professional" replies. I'll give you the benefit of the doubt and assume you're intelligent and resourceful enough to learn how to take on this project.
Second, what roles is the server going to fill? If it is going to be a file server or an internet server (like for email, web, proxy) you really don't need any special hardware. An off-the-shelf PC would be adequate. Maybe not ideal, but adequate. If the server is going to be doing something more heavy-duty (like large network backups, CAD rendering, stuff like that) you might want to consider buying server-level hardware.
At the low end, HP sells some pretty decent servers. Any of the servers on that page will probably be adequate for <10 workstations. If you think you need something more than the low-end, tell us more about what this server will be doing.
Also, what do you mean by dumb terminals? Are these going to be real dumb terminals - with no CPU at all? Or are you using that term loosely? If they really are dumb terminals you are probably going to want to investigate some specialized hardware. Unless you have a specific need for dumb terminals, it will probably be easier to use Windows-based workstation PCs.
The rest of your question - what software to use - pretty much depends on what you want the server to do for you. Tell us more about that so somebody can recommend software that will fit your needs.

Mainly a file server. However i want to be flexible for the future. Im assuming there is going to be some applications allocated through the sever too. I was thinking i would order XYZ server with a tape back-up built in it. Or would that not be a good idea? We have a POP3 account set up with company so i won't be using exchange or anything in house like that. Would a VPN be a good idea? we will have people working at the company and remotely. Are VPN hard to implement and maintain? as far as the dumb terminals. I was really wondering about firewalls, switches, hubs, routers. How many? price range that you think is reasonable.. by the way this is for a mortgage company- thanks for your help jimminy

VPN is definitely a good idea for people working remotely. Windows 2003 server has this built in, which may be adequate for your needs. There are also third-party VPN software and appliances that might be more appropriate. I would recommend starting with the Windows VPN server unless and until you outgrow it. VPN is not easy to set up, but it you are at all technically minded you can figure it out. And if not, you can get the rest of the network set up and pay somebody to come in later and configure the VPN.
Tape backup is a good idea. It doesn't necessarily need to be built in to the server you buy. A tape drive can be added later or you can get an external tape drive. Plenty of options there.
For the networking hardware:
-How big an area is the network going to cover? If it is a single building or a single floor in a larger building, you will probably only need one switch. Avoid using hubs.
-buy a managed switch if you can afford it. If not, something like this should work ok. You could probably even use a cheap(er) off the shelf consumer-grade switch. This is especially true if don't plan on growing your network. newegg has pretty good deals. You can pay as much as several thousand dollars for a managed switch, and as little as a hundred dollars or less for a consumer-grade switch.
-Is the building wired for networking? If not you will have to pull some cable. This is another thing you can pay to have someone come in and do for you, but you will pay several hundred dollars per drop.
-Firewalls. Avoid software firewalls as your only firewall. There is nothing wrong with running software firewalls on your computers, but for a business network you need something more robust. Depending on what kind of business it is, you may actually be legally required to have a hardware firewall (see: Sarbanes-Oxley). There are a couple of different options in this area, ranging from Linux-based firewall computers - IPCop being a popular one - to dedicated firewall devices. this website has some good information on chosing a firewall.

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how to...
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router +wireless router
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