SBS 2003 handles our email and files, do I need a backup server

This depends heavily on what you have now and how much money you could lose over an outage.

For example, what kind of warranty does the server have?  I recommend ALL Businesses should have their server under a warranty specifically because should it fail, it WILL financially impact the business, so getting it running again as quickly as possible is important.  I recommend a 3 year, 24x7 warranty with 4 hour on site response, if available in your area.  Who cares about the workstations - they can have a 90 day warranty as far as I'm concerned - the SERVER should have 3 years (so should laptops, but that's another question).

You need to analyze how much your businesses financial condition would be affected.  If the server went down, how many people would be unable to work? Would the business be unable to process sales orders?  Unable to accept them?  Unable to whatever they might need to do?  A construction firm might be able to squeeze by given that they can still send crews out to construct while an accounting firm might have SERIOUS issues with a server down for a few days.

If you decide it's worth it, you would spend the money on another server that, ideally, lives at another physical location so that you can have protection from a disaster (fire, flood, etc).  And then, to ensure everything does work as expected, you would probably want to invest in some 3rd party product like DoubleTake that can provide near live mirroring of your data - so if the server does fail, the other server essentially takes over.  (Total cost of something like this could be $5000+ (US) depending on what you need.  But definitely worth it if the business would lose $20000 per day it was down.  Not so worth it (though you still might want to consider) if it only lost $1000 per day it was down.  

I think this is a never ending discussion topic because you can just go on and on with all the possibilities. Your current setup is fine but I would recommend you to take the backup off-site. As LeeW mentioned about disaster, if you only backup your stuff on the RAID drive, which I believe will be kept on site, you will not be able to recover your data because that RAID drive will simply be destoryed with your server. Therefore I believe an off-site backup strategy is critical.

You should consider using Tape Drive so that you can take the tapes off-site. Worse come to the worst you will only loss one day of work.

A backup server is ideal if you must not have too much downtime. However you still need to consider the off-site backup solution I mentioned so that you can restore the data on the new server.

THANKS, im sure you are both correct. I will think about taking the RAID backup out of the office seriously. I guess the real problem for me is that the email is solely handled by the server, how would you suggest I deal with email. I have asked my website hosting service to redirect MX records to our server. This s fine but if the server goes down then all email will most likely be bounced back to sender.
How should I have this posible problem fixed.