Hello Again,
In your case, I believe, RAID 1 just mirrors your first drive with the second, so if drive 0 fails, you will still be live with drive 01. I'm not certain 250 GB are necessary for that, or in SME how you would even tell they exist.
In my case I have six 8 GB drives in my 2400, set as Raid 1 on Drive 0, it mirrors itself, and RAID 5 for the other five drives. I'm sure my use of this server is different from yours.
As far as SME 7.x booting up, in the release notes it says they removed the bootable installer, and you have to type "smei586" at the boot prompt. My problem is I have Win Server 2000 on here and don't see a boot prompt. So at this point, I will have to probably install SME 6.x and then upgrade.
This is great experience for me and my dependency on GUI's has me thinking Server 2003!
Gl,
T-rex