I tend to prefer the simplicity of desktop versions of Windows. Unless you are using the extra functionality provided by a server version of Windows (such as DNS / DHCP / roaming profiles etc.), FSQL/FPMI will happily run on XP or Vista (I prefer the Professional and Business versions respectively). I do realise that some manufacturers don’t provide driver support for anything but server versions of software on their server hardware lines.
A Xeon dual core with 6 MB of cache and 4GB of RAM would be massive overkill for 500 tags and 5 clients. Have a look at this link to see the results of Inductive Automation’s benchmark testing. As a crude summary, with lesser hardware than you are considering they were able to support dozens of simultaneous View clients, while coping with thousands of tag changes every second.
Having said all that, I would agree with the old adage that computers can never be too fast If your customer is willing to pay for a good specification, take advantage of it. If however you are keen to impress them with how cost-effective the system can be, you might want to consider cheaper hardware. Remember that FactoryPMI in particular scales well by adding additional computers, rather than trying to do everything with one PC. You can start small and grow the system hardware as you require it.