that is a mighty powerful server, and I would be weary if people are trying to tell you you NEED to locate it with them. Don't worry though, you can co-locate your server nearly anywhere that offers dedicated hosting. Basically what that means, is you own the server and ship it to them. Then install it at their datacenter and charge you for bandwidth.
You can do this for as cheap as about 30 dollars per month to upwards of a few hundred per month. All depending on how much bandwidth you'd need, how many units the server is in size, etc. And your friend is right, T1 is not really the way to go, it is way too expensive for home use and not fast enough for hosting really.
Some of the best co-location providers I've used and seen is
www.fastservers.netThey have great prices, an excellent datacenter, and top notch support. Be careful though, you can co-locate in some datacenters that suck and you will most likely experience a lot of downtime and such.. If you need any more help or suggestions drop me a line
