That is VERY old. Up to Generation 9 now.
What processor has it got in there?
Granted you won't pick anything new up for that price, but if it's got a low/medium-end chip, it'll only be on par with processing power of a new system, albeit much more power hungry.
You can use your W7 OS if needed, doesn't have to be a server o/s to install on a server.
I would go for ESXi on a pen drive, then install whatever you want inside that, with the VMs stored on the HDDs. At least then you're not tied down to a single OS.
That's if you want to spend some time playing and setting up of course.
It's not the CPU that's power hungry. It's everything.
That Xeon is around 2x as powerful as the G1610T in the MicroServer Gen8, so given you have 2 of them, around 4x as powerful overall. But probably around 10x the power consumption, which isn't cheap in the UK. At 11p per kWh (what I pay for my electricity), 200W is £0.53 per DAY, or £193 per year. 200W adds up quick when it's running 24x7.
The £20 is worth paying just for the experience of playing with and setting up a proper server. But definitely not worth running 24x7.