Back up domain controller

Clarifications

look to upgrading to 2k3 if at all possible. As for putting it in place, it will want to modify your schema a little when you try dcpromo on the 2k3 server, but that should be fine if you have a good backup (just in case). Once you have the 2k3 server running a sa DC, you can look at FSMO roles and decide how to place them, move them etc.. Keep in mind, seizing those roles from a crashed server never works well.
As for building the server its self, either buy one pre-built, or find a decent box and install server 2k3, drivers, etc.
What I would do is set up a server 2k3 machine, run dcpromo, give it a few days to replicate fully, switch all FSMO roles to the 2k3 server, switch all other roles to the 2k3 server, and de-promote the 2k server. Take it down and rebuild its moving parts, flat out replace it if you can afford to. And when you put it back in place, try to do so with server 2k3. Dcpromo it back to being a DC, share out FSMO roles to ease server loads and responsibility, share out the FTP and PPTP, and relax a bit...
As for fail over, if both DC's are on the same subnet, of the same domaine, in the same forest, in the same site, then fail over is automatic. No worries.