When I installed Server 2003 on my development laptop, I had to jerry-rig some XP drivers in order to use all my devices, but I’ve been using this OS for all my development for almost a year now, and it has worked out very well. It has been just as stable at XP and very nimble, too. I use a Dell Lattitude D600 with P-M1.8Ghz and 1GB RAM. The only complaint I have is MS’s lack of user support for Server 2003. For instance, I can’t use Windows Movie Maker on this OS, but those are little issues.
As a development workstation, I’ve been very satisfied. With XP, you are limited to one top-level website. With server 2003, it can be many. This is great if you do ASP.NET. Also, it supports multiple remote desktop sessions. I’ve had a very good experience with it.