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Starting SAN on HP ProLiant DL385

I'm a newbie to SAN technology so any additional tips are helpful. I wanted to purchase an iSCSI target and put it on my HP ProLiant DL385 G1 server becuase we don't have the budget for a large SAN.

My questions are:
1. What target software can you recommend for Windows Server 2003/2008?
2. Is it ok to install target on a DL385  or am I working with the wrong hardware?
3. The harddrives are currently maxed out on the server as far as open bays, so how would I expand the physical capacity of the server later down the line? Would I just link an additional server somehow?
4. I am currently planning on using the SAN for 5 virtual machine vhd files, exchange database, and sql database. Any recommendations or advice?
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I saw the Microsoft iscsi target from HP.
http://h18000.www1.hp.com/products/storageworks/ms_iscsi/index.html

Since I have an HP server, would I be able to purchase the target from them eventhough the OS is only Windows 2003 R2 Standard? Is there any limit on iscsi initiators that can connect to this or would i have to pay the $1000 for each initiator i want to connect to the target?

Is the hardware that i already have a good choice to begin with?
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