Don't use an xServe. Instead use a Mac Mini. If you search YouTube you can find videos that show you how to swap out the DVD drive.

Do that and put an SSD in its place using one of the OptiBays from MCE Technologies.

http://www.mcetech.com/optibay/index.html

I have several of these Mac Minis that I have swapped the drives on. Each has a Catalyst DV licence. I have been able to run 2 layers of 1080p@60FPS on these as well as all 8 layers of SD 30FPS.

You can use the Mini DVI and the Mini Display port simultaneously for dual outputs at 1920x1080.

The only problem with these is that you cannot install a PCIe capture device such as a Phoenix or LFG however, you can use a firewire or USB capture device just fine.

The graphics cards in the Minis are not great but I have not had any issues. I strongly recommend these instead of xServes.