Yes, your server's domain should be whatever.domain.com
e.g. My domain is lmeit.co.uk, My Server is called aquarius so it is aquarius.lmeit.co.uk, but also has hostnames
www.lmeit.co.uk and mail.lmeit.co.uk
I have DNS entries on Internet DNS servers that point
www.lmeit.co.uk and mail.lmeit.co.uk to my Public IP address.
Once you are up and running, you can set your SME to be a domain controller, and add your 2K/XP clients to the domain.
A 'domain' in the windows sense is just a workgroup with centralised authentication & authorisation (i.e. a server does all the username/password stuff) apart from this and a little central control there is no difference between workgroups and domains.