pampalani,
No, you can use Windows 2003 Server as a domain controller and terminal
server, though it isn't recommended:
http://www.microsoft.com/windowsserver2003/community/centers/terminal/terminal_faq.mspx (See Question 7)
It is true, however, that you cannot run terminal services in application
mode on a Small Business Server 2003, which has to be at the root of the
domain.
http://www.microsoft.com/windowsserver2003/sbs/techinfo/overview/generalfaq.mspx (See Question 15)
I hope this helps. Thanks!
Spencer Ferguson
http://www.wasatchsoftware.com
Microsoft Open License Experts