You can run sql server on an xp machine. And it would probably run very well. The reason to use MS Server 2003, is the security and management enhancements. It is also a much more stable os, requiring less attention.
Another option is to install server 2003 on your suped up pc. There's nothing wrong with running a server on a desktop motherboard. Server motherboards will usually just give you the option of ECC memory, scsi, raid, and pci-x slots, which can all be very beneficial to a server environment, but not entirely necessary.