You need a Windows 2003 server (or server 2008, but I have no experience with this), there is no way around this. You can, of course, use Visual C # 2005 Express and SHarepoint Services 3.0 if that is your goal.
If you want to do development on Sharepoint 2007, you need to buy a Sharepoint 2007 license, which has a fairly high fee attached to it.
Like SQL, SQL 2005 Express works great for development.
There is a good article on how to set up Sharepoint on a single server:
http://blogs.msdn.com/martinkearn/archive/2007/03/28/how-to-install-sharepoint-server-2007-on-a-single-machine.aspx
You can use the trial version of Windows 2003 and Sharepoint 2007, although if it is only necessary for a limited time (I believe that Trials works in 180 days).
Michael stum
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