I'm not sure about setting it up as a domain controller. Hopefully this can be done thru the "Manager My Server" wizard that 2003 has.

The main problem you will likely encounter is that once this server is IN a domain all the workgroup users will need valid domain credentials to get at resources on this box. You might be able to configure file sharing to permit access to "everyone" but in my experience, even then you need some login creds.

-Peter