Win2k3 server isn't really designed to do ICS.
It can be done
Here's an over view on how to achieve that end.
Now the simplest, and most rewarding, thing to do would be to build your self a small domain using your 2k3 as DHCP and DNS servers and go from there.
Use your router as the main network backbone, turn off the DHCP functionality and just use it for the net connection.
With the 2k3 doing the DHCP/DNS you will have visibility of the other computers. You still wouldn't be able to see exactly what they are doing online, as this would require third party monitoring software. As they are using the 2k3 for DHCP/DNS this would be very easy to set up.
Hope this makes some sense as I'm tinking faster than I can type
Have fun.