Hi Sameeer...
Before you proceed with installing either Windows Vista or Server 2008, please make sure that your system has enough resources to handle both the operating system and any intensive applications smoothly and quickly. Windows Vista requires significantly more resources than XP and unless you make an inventory of your specs, you may end up extremely disappointed with the results.
If you feel comfortable providing your system's specs, we could help you with determining compatability in case you haven't already done so.
Also, be aware of the possibility that drivers and/or software which you need and are running under XP may not work under Vista, particularly with the 64 bit version. Before you make this decision, please ensure that there are Vista compatible versions of all your drivers and software.
I have no experience with Server 2008 but I would guess you would be looking at a similar situation with this OS as well.
Hope this helps.
May God Bless you!