Question : Replace SBS Server 2003 SATA RAID hard drives with bigger ones

I have a client who is running out of disk space on his SBS 2003 server which also has SQL Server 2005 on it.  He has two 60GB SATA drives that are in a RAID 1 configuration.  Every week he has software "Shadowprotect SBS version 3.5.1" take a complete image of the drive which is stored on a USB external drive.

He has asked me if it is possible to replace the existing two hard drives with two identical 300 GB drives.  He wants to know if he puts the new drives in the server, and then puts in the emergency CD which will take the image from the USB backup, and reimage the 300 GB drives.  It sounds like a good idea, but can it be done?  Will that work?

Answer : Replace SBS Server 2003 SATA RAID hard drives with bigger ones

Yes it will work. I assume Shadow protect takes sector level image of HDDs. Thus you need to take fresh image, reconfigure the RAID with new HDDs, boot the server from Rescue CD of Shadow protect and restore from image.
I have done this several with identical product Drive Backup. And I believe that in your case it will work exactly.
During restore perform automatic or manual resize to take the new space.