Yep I keep mine in a locked supply closet. You either want it to be in your office or in a locked office.
I'm not sure if you can install MSE on a Terminal Server. Most people just lock them down very heavily (very restricted permissions).
SBS Standard comes with it preconfigured. I prefer the DHCP on the server to the router. Makes it easier to configure. It can also handle it better. For me the router is a simple internet gateway/firewall. DHCP and DNS on the server. Server is has two ports teamed together which connect to the switch (2 Gbps). Everything else goes to the switch.