My home comp is a pentium 3, and runs fine as both a testing server and a linux desktop.
if your planning to use a linux distro with a package management system I'm sure you can install programs with minimal effort(in debian it's "apt-get install php5 mysql-server apache2", your www folder is then located in /var/www, however other distro's will run different package managers and thus need different commands).
exact processing requirement is dependant on how busy your server will be, and how efficient your scripts are.
I have never set up a server myself, so I can't help too much, sorry.
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The main requirements you will need to take in consideration when setting up a web server at home (particularly a hosting service) is your ISP and bandwidth.
Some ISPs do not allow their clients to set up web servers at all. Most do allow you to, but as long as it not for business purposes.
Also on the same topic as ISPs you need to have adequet bandwidth, particularly upload bandwidth. Most home connections have comparatively small upload bandwidth. If you're going to be hosting multiple sites then you need at least 10meg upload (which isn't common from home user's ISPs). If you want to set up a hosting company you really need to be looking at 100/1000meg upload connections, which are not available at all for home users.
Once you've made sure you have permission from your ISP and you have appropriate bandwidth then you can sort out the actual server computers. These actually don't have to be that spectacular. A pentium 4 should be fine. If you want to get really powerful then there's always Core 2 or even Xeon. A fair amount of RAM is always good, 2gig is plenty. Then lots of HDD space to store all the files (its really up to you how much). No graphics or sound is required for the server, heck you don't even need a monitor, mouse or keyboard because it makes sense to remote connect to the server.
So once you've got all the hardware then you need the software. You need to decide whether to go down the Windows (ASP) side or the Linux (PHP) side. Personally I would go Linux becuase its free, more robust and easier to set up.
You'll need to install a Linux distro, Apach, PHP, mySQL and some form of mail server.
Then you just need to configure them all, then you're set.
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you need at least 10meg upload (which isn't common from home user's ISPs). If you want to set up a hosting company you really need to be looking at 100/1000meg upload connections, which are not available at all for home users.
Your joking, right. A T1 is only 1.5 megabit, so are you saying you need 7 T1s to run a home webserver. At the moment I've got more than 20 domains running over a 300k up connection and the majority of them load in less than 2 seconds.
are you using windows, search for wamp server and download latest version then if you need to make public or whatever then just open the http file config thingy and make it work and allow your router to send it to the folder you have your pages stored on then if dont wanna buy a domain go to www.no-ip.com and sign up and make free names that send people to your ip address
THis wont help you but I mean if you get the gist email me at adgowe at gmail dot com