>I'm learning about making the move from VFP to Visual Studio and I'm reserching database engines for our in-house app.
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>One thing that I'm finding confusing about considering SQL Server Express is learning whether it can only run on the same local machine as the app? I need the data and the database server software (whatever I choose) to run on Windows Server 2003, and handle data requests coming from my custom app that will be installed directly on the local machine of about 8 users. Does SQL Server Express handle this configuration? Does VistaDB?

You can run Express on a workstation or a dedicated server and any clients that can get to it over TCP/IP port 1433 (default) can talk to it. Express is limited to 4GB database size. Other than that it should work fine for your purposes.