I have all the hardware, beside a hard drive. It would probably run red hat 8, as the library near me has a book that you could use to build the internet out of red hat. great book, but i can't use it, yet.

Good as any other. But remember to remove all the packages you don't need.

Easy for you to say. I am never quite sure what I don't need. I have never seen a list which states the minimum packages needed to run Linux.

How does one make that decision?

I always choose to install everything if I have the space. Then I use the Package manager to examine each package and their description and decide who I need and who I don't. RH won't allow you to uninstall a critical package in the package manager. Linux will continue to run. But unless you want to serve web pages, you can uninstall Apache. No mail, then uninstall sendmail and postfix. When you use the package manager you can step by step your way through. Only takes a few minutes to strip the crap out and be running smooth. RH8 rules....

Usually by reading the descriptions. For a server start with minimal server install and browse the list (it's quite long). If you have a spare machine or you don't need the server fast, remove all you think you don't need. Then test if it works. If it does, everything's right. And try to remove more. Small server install can be less than 200MB.