I need the best of both worlds, that being, Windows and Linux
I can only afford one server, not two

So, I figured I could run a VMWare instance on the machine, but the question is, which operating system should act as host, and which as the guest?

For Linux (Centos, 5.3), I plan to host a few websites (Existing websites, using Virtualmin as the Control panel)
For Windows (2008 server), I need it for a paticular gaming server.

So what do you guys think? Run Linux in a VM console within windows? or run Windows within a VM console on Linux?

The server itself will have two SSD cards in a RAID 0 configuration, with 12gb of DDR3 ram and an I7 Xeon processor.

Well I would recommend you actually take two servers by reducing the configuration and spending the same amount on the above.

You could easily get the things done with twoservers and you may even get discounts for taking two.

So whats the use of taking one and then splitting it by Virtualization.

Regards,
Alons

Skip the host operating system and check out ESXi

If you just have one server you want to use it on you should be good to go. You can also upgrade it to get additional features/licensing etc. You'll have to make sure the hardware works with it though, I believe some dedicated companies offer hardware geared towards that, for sure Dell does if you ask about it.