Is 64 bit Redhat Linux that much better than 32 bit to warrant the hardware upgrade?

There's a dramatic advantage ... if your software is 64 bit AND processor intensive.  64 bits means there's 64 bits of data that can be sent to and from the CPU at the same time - versus 32 bits.  Which road can accomodate more cars - a 32 lane road or a 64 lane road?

If you're just running a file server, then it's not going to do much for you.

That's a very clear and understandable analogy. However, let me put it tis way: the one and only reason that we use Linux is for a database application that runs on the server. We are a manufacturer and the database is our accounting software for the company. We all connect to it through a terminal emulator (in windows) called, ICE Tcp. Basicly it's just a bunch of indexed data connected with menus. Real simple. Currently we have a 32 bit server that runs the 32 bit version of the db app. Whatever information is brought up through one of the various menus, it does in the blink of an eye, it is very very fast. To replace that machine which is probably 2 years old (with it's 2.8 GHZ Intel CPU) with a 64 bit system and the misc. expenses involved in setup and deployment, we're probably looking at 2K to 3K minimum. So my question is do we really gain anything tangible if we increase the ability of linux to return data in 1/2 the blink of an eye and pay 2-3 thousand dollars to do it? There is an internal debate here between me and myself about the necessity of the 64 bit system versus the 32 bit system and I find it difficult to justify the need for something that improves performance on a level that could only be measured with scientific gauges or meters. Do you know what I mean?

Also, if I'm not mistaken, we will be limited to only 64 bit apps if we ever plan on adding any other stuff to the server, correct?

Given your circumstances, I really don't see any reason for you to update.  I think duncan_roe's analysis is quite right.  Just stay with your current system for now.  You can always upgrade later if you see signs of impending bottlenecks.

well, maybe I don't need the 64 bit OS after all. I received an email overnight from the person that's trying to sell us the application that's causing this debate. He says that the OS does not need to be a 64 bit CPU, but the OS  "needs to support 64-bit file I/O, We don’t need to run 64-bit programs". I'm confused. To support 64 bit file I/O isn't it necessary to have a 64 bit system?

"obviously" NOT! I know just enough of L to get it up and running and keep it running. I did not know that L supports 64 bits apps. I have ver 3 ES (Redhat) and I will assume that it is included in the group that does. Thanks for the answers.