I am planning on setting up a small business network, with Either T1 or DSL and 3 desktops and one server/psuedoserver , my quandry is do I really need a dedicated windows 2003 server If all that I want to do for the users to have internet access and to be able to do some file storage , nothing complicated.

Would I be better off going with a Psuedo server , mirrored harddrives and Win XP Pro.?. I was planning on backing up to USB external harddrives , rather then the expensive magnetic tape option

What are the pro's and cons of using a pseudo server.?.

If I do use a psuedo server can I still remote in using a vpn from home.?.

I can obviously route all of the internet traffic through the server , in this situation with 3 desktops and a server would I be better off not to route all of the internet traffic via the server.?.

Just curious, why would you need T1 for 4 computers?

No, you do not need sever2003... you only need an extra workstation to act as the file server... you can just put XP on it and share the non OS drives that will be used for storage.
A workgroup can (smoothly) manage ~10 workstations.

External hard drives will work fine for your situation...
Tip: purchase two drives and switch them out every night; take one home at the end of the day every day. This will prevent the loss of data if the building burns down or something of the sort.

Not really sure what you mean by pseudo server, but i'm assuming you're refering to a workstation/server. This is perfect for what you've described... a small business network. And you are right, you don't need to route the internet through the "pseudo server", you could simply use a router w/a builtin switch.

You can remote in from anywhere using http://www.gotomypc.com

hope this helps...