The policy setting is there when using GPMC in 2008, but is a little bit relocated.
The policy settings has been grouped under Policies and the path for the loopback processing setting in GPMC2008 is as below. For the most settings, just add Policies between 'Computer Configuration' and 'Administrative Templates'.
Computer Configuration\Policies\Administrative Templates\System\Group Policy\User Group Policy loopback processing mode
If unsure where the policy setting is located, you find all settings at the same place when looking in
Computer Configuration\Policies\Administrative Templates\All Settings
The GPMC tool downloadable from the link above can be installed on any XP/2003 machine that you want to use for GPO management to avoid the nead to logon to DC. It's just a management tool that works remote from any member computer in the domain.
So, yes for your question about if GPMC can be installed on the TS, but it isn't necessary.
ADUC and some other AD-tools can be installed from adminpak.msi located in \win2003servername\admin$\system32\adminpak.msi
In Vista and above, the tools are part of RSAT (Remote Server Administrative Tools).