can a PC setup as W2K3 DC manage two ESX hosts connected to physical hub/switch?
Services: DNS, DHCP, Domain distributed to host using a hub/switch.
NIC2 on each host connected to switch/hub...spanning a virtual network inside each ESX host
Sure, why not - might need a little more information to give you help with it but yeah, it'll work.
I would be careful with the kinds of switches you are using. Sounds like you might have a switching loop there. If you use managed switches it shouldn't be a problem as you can turn on STP. Just make sure you have taken loops into account when building redundant connections and interconnecting switches.
@Maruti: So switching loops is where you build redundant paths for your switches but leave all connections up. This image sort of shows this. What happens in that picture is that switches will forward broadcast and multicast packets within a broadcast domain to infinity. Switches are kind of dummy devices, they forward broadcasts out all ports without taking loops and the network topology into consideration. This means if you build a network in a lab with redundant connections (a loop) and setup a DHCP server, as soon as any computer attempts to DHCP an address you will probably shut down the lab network.
Having redundant paths isn't necessarily the problem though, because redundancy is a good thing. And most manageable switches have a feature called STP (Spanning-Tree Protocol). Just make sure STP is turned on and correctly functioning and you won't have to worry about loops. What STP does is virtually shut a connection (not physically) so that information cannot be sent out that connection. Thus cutting off the loop. And since it is done virtually that connection still exists should a connection somewhere else in the loop go down, say a bad wire or something, the connection STP shut can be turned back on if needed.
In the picture it would appear connection 3/2 on switch C is shut due to STP.