I have installaions that use both hardware and software clustering. Obiviously hardware is the prefered method, but for those on a budget, Windows 2003 Web Edition has a built in load balancer thatdoes a pretty good job.
If you decide to move ahead withdoing so, Iwould recommend using a sync product such as
PeerSync, it does a nice job of real-time replication of files without eating a great deal of overhead.
Best of Luck...