I have a brand new HP N40L Microserver. This server has an 250GB drive, 2GB Ram and and AMD Turion II 1.5Ghz, onboard USB and four empty HHD bays for now.
I would like to stream video to my Xbox360 and my Mede8er 450x2 and also to download torrents. Shared storage will also be nice to have on my network. I have a few PC's and an ADSL router connected to an Gigabit Switch.

1. I want to know what is the best Ubuntu version for this server bearing in mind my requirements above.

2. Would you recommend installing Ubuntu on an USB drive which plugs directly into the motherboard or use the 250GB drive for that?

3. Could I remotely access my Ubuntu desktop if I would run this as an headless server?

Ubuntu Rocks!!!