If I have a server running ArcSDE on SQL 2008 R2 Enterprise, would it be best practice to also install ArcGIS Server Enterpise 10.1 on the same server? The reason I am asking is because when I deploy a new service through ArcMap 10.1, it's giving me warnings that my layer's data source is ArcSDE and not accessed via direct connection. Should I move my ArcGIS Server software to the same server where ArcSDE resides to clear this warning message and hopefully get a performance boost?
ArcGIS is licensed by the server. If you place ArcSDE and AGS on different hosts, you must license both. It would be unwise to place AGS on the database host. Best practice would be to use Direct Connect.