Load Balancing ?

If users are copy \ pasting large files, your server will be impacted
No matter you use existing DC \ new virtual machine, load will be there always

Its good idea to separate home drives from DC so that at least DC will run without copy\paste load

In reality you should move those home drives to some high end file server (Physical \ virtual) ....with at least 1 GBPS physical network card
The definition of high end file server is in terms of high speed disk (15K rpm) with at least 4 core CPU and 8GB of Ram

if your Hyper-V host is already loaded with full of virtual machines, then its recommended to have separate physical server \ virtual server on another host with less load.

To move your home drives now, during

Now to move your home drive:

What is the size of Home drives ?

The one approach with little or no downtime could be build new server with enough disk space
Create one shared folder on new server with authenticate users granting change share permissions

Then one by one take ownership of original user home directory folder on old server and grant administrator and that user full control on home directory so that user access to original home directory will remain intact
Start copying users home directories one by one from old server to new server share
After completing copy process, change home directory path for affected user in active directory to reflect new path. Active directory will tell you that target folder already exists, do you want to continue, click yes...
Note that keep source home directory name same on target server.
For ex:
old path :  \\server1\homedrives\user1
new path: \\server2\homedrives\user1

Don't do this activity on bulk, do it one by one to avoid downtime, access issues because in order to copy home drives you would require to take folder ownership and if you taken ownership of root folder for bulk copy process, all other users will lose access to there home directories because changing ownership will \ may probably revoke user access some times.

Mahesh.

If your data size is too big, then probably you can use windows server backup to backup  home directory root folder along with home directories and restore it on target server
OR
You may use robocopy to copy data across from source to destination to ensure that permissions of home directories are restored as well

The syntax of Robocopy:

Robocopy <source path> <Destination Path> /mir /sec /Copyall /e /zb /Log+:C:\Copylogfile.log
robocopy \\server1\homedrives \\server2\homedrives /mir /sec /copyall /e /zb /log+:C:copy.log

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But still I think you would require ownership of home directories root folder other wise you will get access denied error during copy most probably

If you wanted to take ownership in bulk then you can do that on home directories root folder by selecting replace owner option in advanced security tab of root folder
This will probably revoke other users access to their home drive
now you need to copy data with robocopy as suggested above
Then you need to restore user access to individual restored home folders

Then share new root folder (Copied above) and grant authenticated users change share permissions

Also then you can change all home drives of users from old path to new path in bulk
You can collect all users at one place by simply running saved query if your users are scattered in multiple OUs
If they all are in same OUs then its very simple
Just select all users and right click and go to properties \ profiles tab
There change home drive path with new one with variable
Ex: \\server2\HomeDrives\%username%
Note that destination home drive folders must be resolved to above format, otherwise it will create new home directory on destination.

Mahesh.

Mahesh, thanks for the load of info. Here is what I will be doing (just to recap your suggestions).

I am to build a new server with enough RAM on it (8 or 16GB) with 4 Cores at least.
I would be a member server and not a DC.
I will name that server data2-srv (instead of Data1-srv the actual server)
Next I will be using Robocopy feature (/SEC /Copyall) to copy the users folders (home folders) from data1-srv to data2-srv.
Once this done (I will do it overnight) , I can go to the OU (I have only 2) and change the homefolder property for all from \\data1-srv\users\%username% to data2-srv\users\%Username

then I after testing that it works, I can safely delete the folder from Data1-srv (users folder and sub-folders)

Regarding the security I think it won't be complicated (pls correct me) since I will be doing is running as domain admin.
My security settings now is that each the domain admin has full access to users folders and each user has full access to his folder only (and a shared one among all)

One a different note ,do u think DFS will help in the load balance or it is "only" for redundancy ?

Thanks

Mahesh
I have experimented with one user and it works fine.
As a matter of fact that user is now opening his Z:\ Folder (Home folder) much faster than the others... It is instantaneous whereas the others, there is a 1-2 second latency....
Placebo effect ?

I will continue with the others today and post the results here.
Thanks again