Pwei,
Haven't seen anyone convert CAD to GIS through a web application before. You might want to look into publishing a geoprocessing service that converts a DXF to GIS in a specifc format that would then be published as a layer to ArcGIS Server, but I'm not sure that it's possible. If you do it, let us know as that would be very cool to see.
Thomas McCracken
GIS Analyst
Georgia Power Company