Can a MD3000 utilize an MD1000 as an expansion enclosure or does the array need to be connected directly to the server?
You can indeed. Actually, you could do both. The MD3000 can have up to 2 MD1000's attached to it. You can find more about that here: downloads.dell.com/.../powervault-md3000_Owner%27s%20Manual_en-us.pdf
On page 27 of this Support Matrix, it will go through various cabling options for you:
Let me know if you have any questions.