Programming Babe In A System Administrator's Woods!

I posted this topic and got not response, but I'm pretty desperate so I'll try one more time.

I'm a programmer at a small company but for the past year I've also been relagated to SysAdmin (fun, fun, fun). We less than 25 users (usually no more than 10-15 at one time). We run NT server on a P133, 64MB RAM, 3.5MB & 2.5MB SCUSI hard drives. We run SQL Server on dual P133's, 98MB RAM, 4MB & 2MB SCUSI hard drives. Our systems are pretty junky, they were bought at Microcenter a couple of years ago and some other machines we had bought about the same time have begun dying left and right. Our Server is very slow and we're afraid it's going to poop out on us soon.

I've been put in charge of taking care of this. "Get us a new server, and don't spend too much money." Being a programmer, not and administrator, I have a few questions:

1. Can I buy 1 good server to replace these two? That would mean running our NT File Server and our SQL Server (on NT of course) on the same box. Is that bad or can I do that? The only thing the NT Server is used for is file sharing (mostly images). No applications, no exchange (although maybe in the future), no internet. 2. If yes, should I go with a really fast desktop with a few ATA/66 drives, a smoking chip, tons of memory. Or, should I get a true server with SCUSI drives, ECC memory, RAID capable and all that. Essentially is it better to get a smoking desktop or a lower end/entry level server?
3. I don't quite understand RAID, do I need it? If so, what is it? We need to backup or data somehow.
4. Anything else you think I'll need? Or, could some list some minimum specs?
5. How much should this cost me?

Our main concern is the SQL Server running fast enough. We have a custom Accounting/Order/Inventory system (Access97-front/SQL-Back end ). The database is about 200MB and growing and the largest table has about 100,000 records and we anticipate about 20,000 records a year in that table. We also store tons of images (art company) on our file server and we would like to link our SQL inventory records to those image files.

I'm really kind of in over my head with the administration but the pressure is on. They want me to do this instead of outsourcing and they want to keep in the <=$3500 range (Server & Backup System). Any help or advice of any kind would be greatly appreciated.

Thanks.