Method for setting up Volume Shadow Copies on Server Core

I've got a similar situation (more data less uses - around 60) and the benefits of having shadow copies available to undo mistakes is invaluable. That being said your question was about performance.

Microsoft doesn't say much about it because it's quite subjective. With mostly reads you probably wont notice anything. NTFS uses copy on write to achieve snapshots. (akin to zfs if you've heard their marketing) Which means for each write to an existing file it has to write a new block and make a note about the old block being old. I've got most of my servers on a raid 5 or 6 setup so I don't notice the extra writes. On a single spindle you might.

I also use the snapshots for backup purposes, I don't need to worry about open files etc. A lot of different backup utilities (ghost, true image, and possibly Microsoft backup) leverage this.

There are so many other variables to network share performance (network, cpu, application) snapshots weren't noticed by any of our staff. Until they did did something stupid with a file that is.

It is possible to turn snapshotting on and then turn it off again later if there's a problem. So it's worth a try.

This Technet article on VSS scalability indicates that the issue probably relates to exhaustion of the nonpaged memory pool which is limited to 256MB on Windows 2003 32bit (x86). VSS uses more resources during snapshot creation and the article specifically states that a 5TB snapshot would require 200MB for that snapshot alone. Depending on what else is making demands on the non-paged pool it seems likely that you are hitting that limit.

For what it's worth 64bit systems have a much larger nonpaged pool and would not suffer in the same way.

The "not enough storage" error generally indicates exhaustion of system resources like the non-paged pool or heap exhaustion in my experience and does not typically refer to either disk or general memory.