> The students will be hitting individualied courses (mixed class working at their own speed).
In that case, you won't have sharp peaks like many requesting something from the server within the same couple of seconds. i.e. less demanding on ressources.
> I had planed on X3460, 2.8 GHz, 8M Cache for my processor and 8G RAM for memory. The study guides we have are html pages and the quizes are xml files.
The quizes require lot of ressources by nature. See the parallel discussion "Quizzes : performance on exams period" http://moodle.org/mod/forum/discuss.php?d=149959
> Seems an extrordinary amout of expertise and skill is needed to make Apache, php, and MySql to run efficiently.
It depends. For one which OS you've chosen. Windows sounds tempting, but their problems tell a different story. Linux comes in various flavours, from do-it-yourself to highly packaged. The general advice is not to go for too much packaging, it is contraproductive once it comes to maintenance and upgrade. You should know what is happening in your server after all.
> I originally snagged WAMP and XAMPP as my starting point as they seemed to be a one stop shop and install.
The "one stop shop" is not always a blessing. See my earlier comment.
> I went with the XAMPP and now see in some FAQs it is not recommended for use other then creating content or internal testing purposes.
The doc-page on XAMPP http://docs.moodle.org/en/XAMPP
says right at the top "It is built to test web based programs on a personal computer. It is not meant for online access via the web on a production server".
> While everyone on the forums seem nice and a ton of knowledge, a straight forward install process with recommended settings seems inpossible to find.
For a reason! See my comment on maintanace above.
> If I follwed your recommendation correctly, your recommending that the web server, MySqL portion be on one box and Moodle be placed on a second server?
I would give the available server a chance, as others have said, with a better OS and a php-accelerator.
, did you read the relevant docs http://docs.moodle.org/en/Performance