I have an IBM server with 16GB ram on it. I am using Windows 2008 server R2. I want to create a virtual PC with Hyper-V for WebServer (for Intranet use). Which OS should I use? How much RAM and harddisk space I need to allocate?
Your host OS should be Windows Server Standard (or higher), which you have. Your guest OS still has to be licensed, and that's not something we can help you with here because licensing of virtual instances is a minefield (see Can you help me with my software licensing question?).
You should assign as much RAM and hard disk as your web server needs. There is no way we can answer this question for you. Is it a small web server? Then allocate 1Gb. Is it a big one? Then allocate 8Gb. Same goes for disk access (although because you need to install Windows, a minimum of 20Gb would be a good start).
The good news is, you can just start small and then increase it if you find you need more, so don't worry about getting it right the first time, just go with what you think you might need and then adjust it once you've done some benchmarks.