Rick Hallihan presents a really nice vision of what a Windows based home server would look like in Blobservations: Windows Server, Home Edition.
At my house I use Windows Server 2003 to manage all of my client PCs. For example I can easily change all machine’s IE security settings (and prevent my kids from changing them back) centrally via Group Policy. Today there are some problems with this in the home, namely some really cool features in the client OS’s don’t work right when joined to a domain such as Fast User Switching and Media Center Extenders. But if you can live with those limitations this setup rocks.
I agree with Rick that Microsoft should build such a product!