Raj,
First your initial issue. Although it would be helpful to know more about your computer such as how old it is, how much processing speed you have (dual core probably means you have enough) and what OS you are running on it as well as any other information you can offer. Bottom line is that computer should have more than enough power to run AC with SQL Server Express no matter what other programs are on there.
I suppose the first thing I would check is do you have a memory leak. 2GB of RAM is plenty, and it almost sounds as though you are not getting the benefit of that. Certainly, installing AC will require more RAM, but it shouldn't require enough to cause your computer to crash. Even before it was crashing, which is a red flag in and of itself. Rebooting may have helped because you recovered all your RAM. Run your computer and see how much memory is available right after rebooting. Task Manager --> Performance Tab --> Available physical memory (the top right square at the bottom). You should have nearly the same amount or at least 2/3 of the total. You can open a memory hog program (probably any Microsoft app -- Word will do) and see the available memory go down. Now every six hours or so with use check on how much is left. Check the next day and the day after. If you notice that the available physical memory (RAM) drops rapidly, you probably have a memory leak. Also, you say you have 2GB of RAM. Make sure you do at the very beginning after bootup. Look in the same place and make sure there is 2GB in the same quadrant under Total.
Also, you have a 100GB hard drive. That's great if it is has 50GBs of empty space. But, it could be completely used up and installing AC may put you down to 50Mbs or less. That would be an issue.
Do you have every single Microsoft update installed? Are all of your drivers up to date?
You also say your local computer person (and no offense to him or her -- I have no idea who that person is), but do you have a reputable computer store in the area that are trained to work on computers like this? This computer should be able to handle AC. Can you call Dell?
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Now for the server question. Again, that question is a little like asking what kind of car should I buy and what packages should I add? You can go crazy or just purchase the smallest you need. As far as RAID, same thing. Some will say RAID 1, others RAID5. Just as long as you use RAID and not RAID0, you are OK. You can't go wrong with either 1 or 5. I actually use both.
Any actual server you purchase from Dell or HP will server you well. Personally, I have a Dell PowerEdge 2900, but that will cost you double what you have budgeted. You will find it hard to purchase a decent server for that amount. You could probably get a low end HP for around $1200. But, this is before you even purchase a server OS. And, I hope you don't put out the dough to buy a real server and then not run 2003 or 2008 or SBS on it.
Disclaimer: There are some who will tell you about building yourself or Ebay. That's fine, but I don't have much experience with that. You are really doing well if you have HP or Dell overnight support for 3 years. Imagine having this problem. You just call them up and say, hey, my computer is crashing -- I will see you tomorrow -- what kind of coffee do you like.
But, really, the best thing to do is go on Dell or HP and start with a lower end server and configure it. But, it will add up a bit once you start getting enough hard drives for RAID at least two -- maybe more, plus RAID controllers, etc.
As far as the individual choices as you go along, I would be more than happy to help as you go.
