THE OFFICIAL BLOG OF THE SBS "DIVA"

SBS 2003 has a very scripted, wizardized install.  Thus the way I've always installed it [straight install, no migration, nothin'] it stick in disk 1 and go grab a book to read [while not out yet, when it comes out you might try Dr. Jesper Johansson and Steve Riley's book].  Once disk 1 is done, I stick in disk 2 and so on.  Or if I have a DVD and DVD drive [but not a dvd burner as that's not a backup platform in my book], I just read the book and enter in the info when prompted. 

I “might” in a new hardware that I've never used before, stop after disk one and make sure the hardware devices are all loaded up with no “!” in the way, but I'm certainly not installing disk 1, patching the base of Windows 2003 and then sticking in the disk 2 and going on.

It will be a bit funky for the folks 'right after' SBS 2003 sp1 comes out because of the fact that you won't have the slipstreamed media.  But pretty soon you'll have the SBS 2003 with SP1 and then you'll just install the cdroms [or dvd] and sit back and read a book.

Bottom line don't stop the install.  Let it run.  Patch the server “only” at the end.

Followup due to comment:

To clarify ... at some point in time all media will ultimately be shipped with the Service pack included [you know how you can now purchase a Windows XP with SP2 already slipstreamed? Same concept.  They always do a refresh on the retail and OEM media] 

So while there will be a time when you will be installing systems with SBS 2003 RTM gold code [as it's called] and then bringing it up to SBS 2003 sp1, at some point in the distribution pipeline, you'll see SBS 2003 with SP1.  Can't tell you how long that takes, but ultimately you will not need to “apply” SP1, it will be included already in the product.

Also Steven mentioned that he stops after disk one, only to partition the rest of the disks, mount the cdrom data on a drive, and then he finishes the install from that.

Another followup.. this article that states: 

"Having completed this you will get the SBS Setup Wizard welcome screen. At his stage you should not proceed with the wizard. Instead you should configure the server to support the rest of the installation.

Before commencing with the installation it is of utmost importance that you install all available patches at http://windowsupdate.microsoft.com.

Otherwise, some components might not install properly."

Don't follow that advice.  You should ALWAYS complete the SBS install and then and only then go to Windows update for the final upgrading.  At the time that article is recommending that you go to Windows Update you don't have good enough firewall protection in a pre SP1 operating system.  Besides if you followed that advice today, you'd end up with Windows 2003 sp1 on a pre-built box and you need a non SP'd Windows to install Exchange with it's SP1 in a specific order.  This advice was a bit of leftoverness from the issue we had with Sharepoint.  We don't have that issue anymore.  And even if you do end up with old media that has the “Sharepoint bug“, you just WU the machine AT THE END of the install routine.

Again, just let the install do it's 'thing' and don't go to Windows Update until the system is fully built.

Also spotted this:

Windows Server 2003 Service Pack 1 application compatibility:
http://support.microsoft.com/kb/896367

This article contains information about application compatibility testing that was performed for the English version of Microsoft Windows Server 2003 Service Pack 1 (SP1). The Windows Application Experience test teams tested 127 server applications on computers that were running Windows Server 2003 with SP1. This article contains two tables that summarize the results of the tests.