downloaded an ISO 2003 server from Microsoft and burned to a cd

How did you "burn" it? If you browse the contents of the CD you created, what do you see? An ISO file or a bunch of folders?

is this how I should be going about reinstalling the o/s?

Eh, sure. You will need to load drivers for whatever controller you are using. You could also use SMTD/SBUU to assist. Really shouldn't be using 2003 at all.

I unzipped the document, it seems as though the cd-rom is not recognized during the boot, even though the optical drive is #1 in boot sequence order.  The machine is used as a file server for a database that doesn't work on the windows 7 platforms.   All the workstations are running window xp at the moment.  Can I load the software on one of the 2 new hard drives using another workstation and then put it back into the T300 and run the raid 1 setup?  Or, would it be better to just load windows XP on the server and create a raid1 setup after the o/s is installed via another workstation.    When I say "using another workstation" I mean loading the hard dive into another computer and booting it with the software and then taking out the hard drive and putting it back into the T300 server.