Yes, you can do that. A router is used to connect one network to another, like your local network to the Internet.
Unless you are using a DHCP server on your server box, you will need to assign static IP addresses, like 192.168.2.xxx where xxx is between 1 and 254. (0 and 255 are reserved).
Many thanks, and just one more question please? I bought a netgear GS605 switch (5 ports), gigabit speed, can i stick the printer in there as well, as the 2 clients and 1 server, and use the printer server feature on server 2003?