Question : Problem: Need a CHEAP fileserver.

This is a K-8 school. Currently there is an old Compaq server with a 6GB hard drive running NetWare 4.11 that is acting as the fileserver. I need to replace it soon. All it is doing is serving files (less than 500MB's of files), not doing user authentication or DHCP or anything like that.

There are a few people who need to be able to store stuff on the server plus there are a few apps that need their data to sit on the server. I need to be able to set permissions on the server so that certain people can only access certain things. I need to be able to map drives from Windows clients and read/write from Windows clients.

What are my options?

Would FreeNAS do this? Or would a Linux machine running SAMBA work better? I don't have a lot of money so I will likely be just buying a cheap PC with a big HDD and installing some open source solution on it.

Answer : Problem: Need a CHEAP fileserver.

Unfortunately FreeNAS is sort of in the midst of working out the permissions.  I believe access control had to be by partition so not particularly fine.  It really does take only a few minutes to set up so maybe take a look,  its been a few months since I gave it a spin so maybe they have moved ahead more.

Couple other possible choices would be  NASlite,
http://www.serverelements.com/

or OpenFiler,  which looks like a pretty well developed setup
http://www.openfiler.com/about/

These are both GUI frond end linux setups.  To be honest though current linux systems are pretty easy to configure.  I've dont a couple of CentOS Linux systems which were a breeze to setup,  about on par with installing windows, full GUI install, automatic disk partitions etc.  To cut down on extras just unselect everything but samba and what it needs.  All hardware autodetected, and you can setup shares much like a windows system.  Even has a automatic updater.  CentOS is based on RedHat Enterprise.

http://www.centos.org/

You could buy a low end NAS,  easy and fast to setup Buffalo Linkstation w/160GB drive,  might be similar to what you would end up spending on hardware for linux.
http://www.newegg.com/Product/Product.asp?Item=N82E16822155303

Personally I like the flexibility of a regular Linux distro over the NAS ones.  Though I suspect that when FreeNAS gets to version 1 it will be a solid and well featured setup.