Reasons that I can think of that Win2k isn't supported on WHS:
- Win2k is, technically, an enterprise (rather than home) OS, and WHS is meant as a home server solution (hence the name.)
- Win2k manstream support ended June 2005: http://support.microsoft.com/lifecycle/?LN=en-us&p1=3071&x=12&y=9
As for mirroring:
Any shared folders that have Folder Duplication turned 'on' have all of their files duplicated on a second HDD in the storage pool. Folders that do NOT have duplication turned on do not; same goes for the OS itself, as well as your computer backup files. The OS can easily be reinstalled, and losing your backups is no risk - they can easily be recreated.
And, basically, yes. You remove the dead drive from the storage pool (via the WHS console), shutdown, and change the drive. Boot, and add the new drive to the pool.