Can't add much to the above,
However, when I start the VM machine, it wants to load from CD and not the installed version. Any ideas?
But if you want VMWare server to mount your existing Windows partition, you can do that: I wouldn't recommend it.
When you setup the VM, it'll ask about setting up the harddisk and will give you an option for mounting a partition "partition access". You can go ahead and do that if you want, though you should setup a separte "Hardware Profile" under Windows because VMWare will install different disk and video drivers than the physical install. Then you'll need to reactivate your licence.
However, you're probably better off reinstalling Windows in a VM, though you will need to have a separate licence.
If you want to run Linux both off the physical partition and in a VM under Windows, the same applies, except without the "Hardware Profile" or licence issues. Bit of a headache really, and you're better off with a separate install too.
I'd recommend Linux as the server, but that's just my preference because I like the OS better.