You can run windows but dont under estimate the importance of what Mary said, I have to bite my lip every time I read a post from someone running IIS.
You say you currently host elsewhere, if that is managed (moodle) hosting and you just want more control of the application you could look at companies like Rackspace for hosting and manage the application yourself. There are cheaper alternatives to rackspace but they have UK datacentres and I have not seen anything run less than blisteringly fast on their hosting and their support is good.
If you want to host internally I would advise you to build something that will scale, load balanced.
As for Linux, why not set up a couple of old pc's with it and see how you get on. Ubuntu server is ok and easy to get going with. RHEL costs us an insignificant amount for educational use and is worth considering over Centos.
It is easy to get going with Linux, I dual boot my pc as its easier to set up Moodle for development like thst than try and get WAMP running properly, which is why there are things like Xampp for windows but no real equivalent for Linux. You just install the packages (as Matt suggests) and open localhost in your browser.
Depending on your hardware it can be a lot faster too.