1. Will a Pentium II work well for a music server providing it is only being used for Jrec and tRio and maybe DHCP?

No problem, plenty fast enough (assuming it has a sensible amount of ram).

2. Should I use Windows 2000 or some version of Linux? I've got an old verion of win2k (also xp home) laying around and Redhat 5.2 but if I went with Linux I might just by the latest version since it's only about forty bux.

It may well be easier to get Jrec running under Linux, but you then have more messing around to get the Receiver to boot.

Also I would want to stuff this computer off in a closet so I would want to be able to remotely access it from another compuer.

That is easy enough, whichever route you take. With Linux you can just telnet/ssh into the box, with Win2k you can install TightVNC.