I would disagree to be honest.
I'm not saying your opinion is wrong
there are 4 options
1) add some ram, install SQL, there is no technical reason not to do this, worst case the database is a hog and you have to get another server and repoint the clients ODBC (NO RISK)
2) install HyperV on your server install a new server on that server and install SQL into the new virtual server, you will need to alocate a fixed size disc as the dynamic setup can be very slow this will tie up a lot of disc space. (Minimal risk but more load on the server and a big reduction in disk space)
3) trash the lot and start from scratch using esx of hyperv, install two or 3 seperate virtual servers onto the host os (major risk, hours work, hours down time, possible new software and concepts to learn)
4) buy a server and software install it on the new server (no risk best but most expensive solution)
I spoke to your senior system architect who said no reason not to do option 1 (unless there is a spare server doing nothing)
(i am assuming its a database to be accessed by lan users only, and not a back end to a web app or random internet users, if this is the case punch your boss for being stupid)