Yes, you can run the server on the same machine as the client.
I haven't done any benchmarking with the zone or world servers but if anyone is interested, I have a P133, P166, and P200 I would be willing to test on for speed/load.
My current machine doesn't budge, which is running the world and zone servers. But it's considerably faster; a 1.4G with 1G RAM.
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