Benefits of a Server Core Installation
All Windows Server 2008 editions support Server Core, with the exception of Compute Cluster Edition. And installing Server Core doesn't give you a break on the cost of the license—it's exactly the same license and media as the full Windows Server 2008 installation. At install time, you simply choose which edition you are installing. So, if you don't save any money, and you don't have special media, and you have reduced functionality, why in the world would you choose Server Core over the full product? It's simple, really: security and resources. Let's take a look at those two in a bit more depth before we go on to the details of how to actually install and configure Server Core.
Security
In the old days, whenever you installed Windows Server, it automatically installed just about everything that was available, and turned on all the services that you were likely to need. The goal was to make installation as simple as possible, and this seemed like a good idea at the time. Sadly, the world is not a friendly place for computers any more, and that approach is no longer safe or wise. The more services that exist, and the more services that are enabled, the more attack vectors the bad guys have to work with. To improve security, limiting the available attack surfaces is just good common sense.
In Server Core, Microsoft has completely removed all managed code, and the entire .NET Framework. This leaves a whole lot fewer places for possible attack. This does, obviously, impose some severe limits on what you can and can't do with a Server Core installation. And it also means that there isn't any PowerShell possible, which in our opinion is easily the biggest limitation of Server Core—but one that we hope will be resolved in a later version of Windows Server.
The default installation of Server Core has only less than 40 services running. A typical full Windows Server 2008 installation, with one or two roles enabled, is likely to have 60 or even 70 or more services running. Not only does the reduced number of services limit the potential attack surface that must be protected, but it also limits the number of patches that are likely to be required over the life of the server, making it easier to maintain.
Resources
The second major benefit to running Server Core is the reduced resources required for the base operating system. While the official requirements for installing Windows Server 2008 are the same for Core as for a full installation, the effective numbers are significantly less, in our experience—with the exception of the disk space required (only 2 to 3 GB of HD space for a running Core installation). Plus with the limited subset of tasks that you can perform, we think Server Core is ideal for running those infrastructure tasks that everyone runs, and that don't require much interaction over time. Tasks such as DHCP, DNS, and, increasingly, virtualization. Now if it just had PowerShell...
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