XP Pro should be more than adequate for the tasks you mention. You only need ot upgrade to 2003 Server if you want more control over users, resources etc. For a couple of clients, XP Pro will do the job nicely. File sharing is easy as well.
PS. If she has the £££, would a Wi-Fi setup not be better? Offers more flexibility and I doubt the drop in speed will have any adverse affect on the day to day usage. Not many people can boast about posting on PPRuNe while sitting on the toilet!
