Would you recommend an Xserve over a desktop Mac for the server?

Since the Xserve is configured for server applications, overall it would probably fit your needs of a server better than a desktop machine. The radmind server daemon doesn't take that much load, and can be run on desktop boxes. Many installation are using modest desktop Mac's without problems to manage small sets of clients. So, I would recommend thinking about how often you will be upgrading clients when purchasing extra hardware to run radmind.

In the end, it depends on the situation. We've found that radmind on a very modest piece of hardware can support a large number of managed clients.