Both applications share the same web storage system. The worse that
could happen is that you could lose everything you've already made in
sharepoint (or all the data in exchange  - depends on the installation
order).
It won't work  even for development  purposes...and I believe it's written
somewhere in the documentation.

It's correct that SharePoint Portal Server on top of Exchange is not a
Microsoft-supported *production* configuration.

However, for demos/personal software development, SPS should install  on
top of Exchange Server 2000 SP1 *Standard* edition. It definitely will
not install on *Enterprise* edition.

OK, so the key is to use Exchange Standard. Remember this is a
development environment and will not be used for production. I just
don't see the point in putting in another server  to create the
development scenario.

Well, I think I will take the plunge and give it a shot. I will let you
all know what happens when you install  Exchange on top of a server
running Win 2K (set as a GC), Sharepoint Portal and SQL 2K.

It has to be SPS on top of Exchange 2000 SP1 Standard edition ... You
can't install  Exchange on top of SPS. It won't work.

SPS and exchange  cannot exist on same machine. See readme of SPS SP1 or Article
ID: Q277567 on MSDN.
So, if u want to use CDO (Exchange) and PKMCDO (SPS) in ASP/VB or other
language, u will have to install  exchange on that machine  and then install SPS
Client for PKMCDO.
Also, if u want to kick-off the workflow in exchange directly by adding a doc in
SPS, its not supported. The solution is to have workflow implemented in exchange
(actually even exchange is not needed here, active (non-enhanced/non-workspace)
folder can be used for workflow definition and the document can be added to SPS
at the last point of workflow.
SPS workflow is pretty rigid, I thought SP1 will change that but it hasn't. Its
not exposed through API, and also its only at folder level. If anybody has any
idea about how to enhance SPS workflow programmatically.

For development  purposes, VMWare is a great alternative if you don't
have the extra hardware.

And if you do it that way, I have installed it on several lab boxes and never
had any poblems.

Exchange SP2 storage format definitely not compatible with SPS (with or
without SP1), so you can install  it together and SP will start, but will
not be able to see WSS properly

I have put  these to use, and added them to a request for another development
system. In the meantime, we are going to go the VMWare soltuion route.