This might do what you want, or at least achieve a fairly close
approximation:
http://mylogon.net
Was originally written for data-entry situations, to allow any user to logon
at any terminal without needing roaming profiles. However, it's also quite
applicable to small networks, where it will allow you to have a 'real'
logon-prompt without going to the expense of a server-grade OS.
XP Pro will suffice as a server, provided you have less than ten users.
When you say storing executables, I presume you mean running all software
from the server? If so, that is not really a feasible route with modern
software, which is too bulky and too tied-in to the OS to allow that. Either
install the software locally and keep the data on the server, or else if you
want to have everything on the server, look towards a 'thin client' model.
That will cost though, as you will need a Terminal Server, and they don't
come cheap.