I installed Windows 2000 (which had problems of it's own, but at least it installed), then used that to upgrade to Windows XP. Hardly uncomplicated.
IIS Personal Webserver? Haven't seen that mentioned anywhere, my bad.
Oh please. While I'll allow Windows Firewall is a (horribly basic) firewall, ANY third party firewall is going to do better.
Windows Connection Sharing is also horribly nasty. Been there, done that, then used Linux and DNSmasq to make it actually work.
As for people who ran a dual server/desktop on their machines, me? Until I hooked together a home server, my desktop served quite happily as a server.