Can Win2k / Win2003 domain.

Faced with a choice of upgrading a small system and whcih Microsoft OS to purchase;

If we start a new Widows 2003 domain on a new server can one of our older windows 2000 work with it or must I upgrade the license on that box and install Windows 2003 on both machines?

Is there any issue with Win2k professional workstations and Server 2003?

Is there any reason to have all work stations upgraded to Widows XP when using Server 2003?

Thank you all for your opinions.