Can DNS service be installed on a Windows 2003 Server Standard Edition member server and if so, are there any problems associated with doing so?
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Yes, you can install DNS on a member server and no, there aren't any problems associated with doing so. It helps to run AD on it as well, since you get redundancy then for both, but no, you can have DNS as a standalone.
Yes you can install it , you can create secondary zone of your primary dns , this helps name resolving procedures in your network , only disadvantage of this procedure is that you cannot store this zone in Active directory , unless you configure it as DC. There will be no problem.