I've got my Powerbook running 10.4 and 10.3 server. But not on that mode ...
It *can* be done but ...
- Heat will be an issue. It will work (Powerbook will work), however if forced to be running lid closed, it will get hot. Air needs to circulate. It gets too hot. So rather buy a desktop (G4, G5, an XServe, even used ones will do - or even an iMac or an eMac .. or even a Mac mini will run server easily).
- iBook would need the hack ...
If you want a small server that you can easily take to an other place, try a Mac mini instead. That can run always on, and it takes even less space.