Yes, I am currently working on this subject matter myself and I was able to install SBS 2008 SP2 on it. You will need to have at least 4GB of memory on the system, the 512K is not enough (And even this is probably too little so you will probably need to upgrade the hardware too, that is add a fan to the memory also to have at least 6GB. One thing you will need to look at is are the RAID 1 drivers, the RAID1 drivers from DELL for Server 2003 64 Bit work with 2008, but you will have to have them on a USB stick. Also my system just came with a CD-ROM drive, so you will have to either buy a DVD-WR drive or buy a USB stick where you will need to have the installation files. You can prepare this either yourself or use a little program http://gladiator-antivirus.com/forum/index.php?showtopic=99937
which allows you to copy the DVD installation disk and make a bootable usb drive.
Hope this helps a little!
Just to clarify something viennacab said so you don't get confused ... there is no such thing as "RAID 1 drivers". You will need the drivers for whatever RAID controller you have - and you will need to configure the RAID before attempting to install, but the actual RAID level doesn't matter. You might already have known this ... just in case, I didn't want you scouring Dell's support site for a RAID 1-specific driver.
As 2008 is not a "supported" OS for the SC1420, you will not be able to use the installation utility to help install it ... you will need to do it directly from the OS disk.
I agree with your additional comments, except for the part of using directly the OS disk. It is possible to successfully install Windows 2008 from a USB stick after making it bootable with the utility I suggested. There are other issues though I am having problems myself. After I updated some security hotfixes Windows SBS 2008 was not able load anymore. My first thought was there was a registry problem, but after I compared the Last Known Good configuration with the standard configuration and there was no difference in those two registry versions, I have believe there is a problem somewhere and this is the reason why 2008 is not a supported OS.
If you have tried booting USB on the SC1420 and say that it works, then I will trust you. Many older systems do not support booting to USB. The SC1420 is of the same generation as the 2650, so I would have guessed it wouldn't boot to USB ... but we will go with what you have tried.
BTW ... when I said install "directly from the OS disk", I meant that generically, meaning he will have to install using a traditional method of installation (usually from disk) ... only as opposed to using the installation utility (ISM/SBUU/SMTD) to install. I'm definitely familiar with installing 2008/2008R2/Vista/7 from USB ... the 2650 is about the only machine I install from DVD anymore, since it does not boot to USB.
"Thousands" of options? There is a grand total of 1 configuration question that even matters - which RAID controller he has. After two weeks, I'm guessing he has worked it out or decided on something else.
Dell may not have issued drivers, but the thing Dell doesn't say about an operating system that is not "supported" is whether they tested it and found it was not compatible or didn't test it at all. Often drivers can be found from the manufacturers of the individual devices. The only real way to know is to try it. I've gotten several non-supported OS's to work ... but that can sometimes end up being more trouble than its worth, especially if it doesn't work.
I will probably order a T410 after some time, because I don't really want Dell to think I am trying to be a thrifty penny saver alone. But I do realize though that people on this forum are honest people and this is appreciated a great deal! Thanks everyone!