Jack,
Wish you would have consulted with me first. Setting up a domain is easy and hard at the same time. We have to get back to best practices. First, as you know, no Home version of any OS that I know of can connect to a domain. So, you need to be with XP Pro or Vista Business or whatever. I think I would get all WIN7 Business if possible. If you can, save the $20 and don't get Ultimate unless you really want BitLocker, which I doubt you do.
OK, after that, Best Practices. And, I am going to be firm to drive home the point:
If you want the domain to work properly, you MUST use DHCP on the server. SBS or any server for that matter wants to control everything; has to control everything. For active directory to work correctly, you need the server to be the DHCP server. Not sure what was going on with the private IPs you talked about. Anything with 192.168. and you are golden. Just as you did, make the router 192.168.1.1 or 0.1 or 16.1 -- these are the usual. Make the server in the same subnet of 192.168.1.2 just as you did. These are both static. Everything else should be dynamic or dynamic/reserved. In order for HTTP://connect to work, the clients have to be DHCP enabled. You can't assign them IPs and expect them to connect. While you can connect them manually, you really want them to connect via the connect wizard. This sets everything up the way it should be set up. You can still have the workstations use Workgroups.
Allow SBS 2008 to assign the addresses. You will end up with every client looking like this:
192.168.1.10 IP Address
255.255.255.0 Subnet Mask
192.168.1.1 Default Gateway (Inside/Private address of router)
192.168.1.2 DNS (All clients should point to the server IP)
Once this is done, your network will be fine.
I am not saying you cannot use the Router for DHCP, but it just is not a good idea.
Things like Printers and Scanners that are networked, should use DHCP and get addresses from the server and then be reserved so their IP address never changes.
First thing I would do would be to go back to how you were, stay with 3.0, and try to get all WIN7 or at least all Vista Business. If you have Vista Upgrades, I can make them full versions for you.
As for the database tuner, I keep looking for it, but someone must have it, and support should be able to give it to you.