Thats what is was designed for, yes, and it can do windows file sharing pretty well. However, it can also be altered, which is the cool part. But there's no need to alter it if you can find a linux distro that does exactly what you want, ready-made. There's tonnes out there.
Since SME runs on Centos, theres a world of software you can add, but there is sometimes a problem - SME locks down communication pretty well, and some apps wont work properly unless you modify it to fit the SME way of doing things.
Webmin is a great add-on for linux. It lets you configure many popular programs, like a few DNS services, file transfer services, DHCP, and on and on. However, Webmin doesnt know some of the services SME is using, so it doesnt give you control over them.
If you were crafty enough, you could prolly disable the SME dns service (tinydns I think it called), and install a more configurable one. But it would be a lot of work learning how. Too much, I think.
2003 Server is pretty nice. Its just the $600 base price and license fees that kill you...