You could do the same thing now with proxy 2.0 installed on your server (or any other proxying software say .. wingate) and letting your users connect to the server with the proxy client. Proxy I think is still for free as are a lot of other proxy programs out there. Try doing a search for proxy on www.download.com
As for your question windows 2000 is literally that easy with an "in place" upgrade just installing over the top of your existing operating system.
There are recommnedations though for disaster recovery reasons.
A) you could introduce a bdc and synchronise the SAM (security access manager database) to the bdc before you do the upgrade.
This will keep a copy of your user data just in case anything catastrophic happens.
Im already assuming that your going to backup your data.
hope this helps,
jb