1. Yes
2. You can use any flavor of windows from w2k and up. Go into Add/Remove Programs. Click add/remove windows components. Click on Applicaion Server and Check IIS. You'll need your windows cd for this. This is also where you would add any server extensions you want installed (ie ASP) From there google about setting up a website with IIS and post if you have more questiosn.
3. Yes, server 2003 can run 99.9% of the same apps as Windows XP.
4. Yes, you will want to run the server behind the router and forward the port. To put it before the router you're going to need 3 IP's from your ISP not just 1. (1 for each nic in the server and 1 for the router).