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How can I set up a working in-home domain with users and permissions

I just installed Windows Server 2003 for the first time and I would like to experiment a bit with it in order to learn some more about managing networks. I have a four computer in-home network. If someone could provide me a near step by step guide as to how to set up a working dns server  (for domain) and how to actually get active directory services to work. There is such a variety of options I would first like to know what is important. I also have this problem with creating users, whereby everytime I try to create the password and click ok it tells me it is unable to do so because of pasword strenght is not adequate, which is bs because i tried a billion combinations, on top of that I disabled the password requirements under group policies. Thanks ahead of time!  (also a stupid question, but what is the real benefit of running a domain server?)
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There are many advantages to using a domain - its really all down to much better and more manged and integrated security, the ability to enforce policies and security centrally over the entire network. Domains also scale vvery well - you can simply keep adding users, computers and resources and to provide controlled access to them resources without connection limit issues and provide a single longon for access to them all.

There is a nice article on installing active directory at http://www.ehow.com/how_2002004_install-active-directory.html but I think you may have already done this.

As far as passwords are concerned you can set password policies only at the domain level - the default domain policy the options are:-

To modify the Password Policy on the domain, Click START->Programs->Administrative Tools->Domain Security Policy
Expand Account Policies->Password Policy
The settings are:-

Enforce Password History: (Default 24) - Stops you using the same password each time by remembering previous passwords you have used.

Maximum Password Age: (Default 42) - Forces users to make up a new password at the specified interval - 0 = never expires (unless the account is marked "Password does not expire")

Minimum Password Age: (Default 0) - Passwords must be at least this age before they can be changed (stops user changing passwords too often)

Minimum Password Length (Default 8) - Passwords must have at least this number of characters

Password Must Meet Complexity Requirements: (Default Enabled) : in enabled Passwords must contain:-
At least one letter A-Z
At least one letter a-z
At least one number 0 - 9
At least one character that is neither a letter or a number

Store Passwords Using Reversible Encryption: (Default Disabled): May occasionally be required for interoperability with some non-Microsoft Systems.

After changing any policy you need to run
from the RUN option or cmd prompt to apply the policy immediately. If you don't do this it can take a while for the policy to become effective.
ManzolaAuthor Commented:
I am having problems setting up the DNS server. I am getting confused with forwarders reverse forwarders and things like that. I am not sure what IP to use for the fowarder, and I would really like to know how I can get it to work.
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