Set, in my system, one older PIII machine, running pedestrian old Win98SE, with a couple big hard drives and 2 NICs serves as both Server and, behind a router/hardware firewall, as DSL gateway. It doesn't even have its own keyboard, mouse, or monitor; a simple, cheap KVM switch lets me use the input and display normally used by my main system, on the rare occasions I have any need for or interest in seeing or modifying whats going on in the sucker. It mostly just sits there complacently doing its job. For backups, there are a buncha different external hard drives available; one with 120 or so GB should run no more than a couple hundred bucks, much bigger ones are available. I use a couple from Western Digital, and another from Iomega. Its quite nice to have a few hundred gigs of storage for backups and other relatively infrequently used files, folders, and applications independent of the hard drives of your actual day-to-day working 'puters. Typically, external hard drives connect via USB, USB 2, or Firewire, a few have direct Ethernet connectivity. Just about any of them may be easilly mapped as network drives available to all machines in the system as long as the machine to which they're physically connected is on. With Ethernet connectivity, the drive doesn't even need a host machine; its just part of the network. A few come with some sort of relatively configurable auto-back-up software, and there are lots of third-party auto-backup applications available at pricepoints all over the place ... and some of the cheaper ones are damned good. I use
Handy Backup, and figure it works OK for what I use it for. Your mileage may vary. The PC Magazine page that link takes you to lists a whole slug of backup utilities.