Try only having the 20gb drive installed, and load 2003 to it. First off you will need the latest bios installed on the PE 350, and atleast 512 mb. of ram. If you have any issues with the install of server 2003 try another media disk since you may have a problem there. Make sure that you can see the drive in the bios. If you still have a loading problem try putting the 20 gb. drive on the seconday channel in the machine, and see if that works. The newer bios should remove the 27gb drive limit. If all else fails try another drive, even a little 10 gb. will do for the os.
I have 3 PE350's running MS Server 2003 with no problem at all.
PE350 700mhz 1gb. ram.