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Security Risks Associated WSUS & IIS on sole domain controller

I'm looking into implementing WSUS on the office's sole domain controller (Win Server 2003, R2).  A buddy told me, however, that -

1) The associated IIS activation creates security vulnerabilities on the server.  
2) The vulnerabilities are associated with the lack of local user accounts on the a domain controller.
3) WSUS (and IIS) should not be installed on a domain controller.

What are the security issues associated with the lack of local user accounts and IIS?  Are they surmountable?  Or, should WSUS be installed on a separate server (for which, I have no money.)

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