Best Server Practices RAID

Whats the best practice for setting up a W2k3 server with hardware RAID? I read that it was

A minimum of 5 Drives
RAID1(2 drives mirrored for OS)
and
RAID 5(min 3 drives) for remaining resources

And how does this work with Say, setting up an MS Exchange server. Also, if say one of the drives in the RAID array goes bad and the other(s) takes over, how are you informed that a drive in an array has gone bad?