Please can you help me select an appropriate server for my small business?

I REALLY need your help so please take the time to read and respond. I am looking to purchase a server for my small business and the appropriate software (OS, backup software, etc). I have a very limited budget (I would like to get something below £500, preferably less, but also will spend a bit more if necessary). It must have a Microsoft server OS on it as I am looking to run a database intensive CRM server application on it in the future.

These are the core tasks the server needs to perform:
- Support 3 client pcs
- Printing
- Storage of common company documents and files
- Central backup location for all the client pcs
- Remote access of company documents
- Run a database intensive server application / CRM
- Not sure of what is involved in running my own exchange server system for emails, but I am paying out £20 per month for 3 X 2Gb exchange email boxes from fasthosts. Would be nice to get rid of this expense

From my research and considering my limited budget, I was thinking of going for the following setup:
- HP Proliant server
- Windows Small Business Server 2003 OS
- 1 X 500Gb HDD (space for 3 extra drives) - hot swappable
- Dual core CPU
- 1Gb RAM
- Use an external 1Tb USB hard drive (Lacie) for server backup

I have spoken to a few people that have given me differing recommendations, so I wanted to come on to here to get some expert opinion. As well as your advice, answers to some of these questions would be appreciated:

- Tape drives seem to the most common server backup solution, but the drives are so expensive? Why are tape drives the the most common solution? Is it a bad idea to do backups to a 1Tb USB Lacie external HDD? (I chose this to limit costs for now)
- Secondly, should I be thinking of getting more than one hard drive?
- I don't know what a RAID controller is, but people are telling me I should consider getting one?
- Should I be getting more RAM or bigger HDD, or is this sufficient for now?
- Windows Small Business Server 2003 sounds like it would be a bit easier to administer than Windows Server. Am I right in choosing this server OS?

I don't want to go into overkill mode as I need every penny I can get my hands on right now, but I also don't want false economies. PLEASE can you folks help me out here. What kind of server would you recommend I go for? Please can you provide me a link to any good preconfigured systems out there (e.g. from stores like www.ebuyer.com ). Lastly, please try to explain technical terms in your responses as I am not an expert at all!! Thanks