Windows servers are not cheap - apart from the cost of the OS software and the client licence for 5 seats, the hardware is at least a similar price and spec as your laptops or other PCs, since you note that they are all Windows 7 used as workstations. Could be over £500 in UK terms.
Another way is NAS - dedicated network attached storage, starts just about £120 for 2TB
You could use a Linux SaMBa server on a much lower spec machine (no GUI, permanent monitor or keyboard needed), which could be set up to act as a domain controller and could be managed from any of your windows machines with SWAT - served as interactive web pages in your browser. The software is free to download and use, like most open source stuff is. It's not that difficult to set up, and there is loads of information and community support online. Once it is set up you just leave it to run. From free to about £50 for the hardware,an old dektop for instance. It could boot from a CD and run mostly in RAM, then the only ongoing cost would be that of additional storage.
IMO NAS would probably would be the best way to go, in terms of ongoing energy consumption and initial price, and ease of use. Samba the most challenging to set up, could be fairly cheap and easy to expand the storage over time, and Windows Server the most expensive to start with, most expensive to run and maintain - but great training for a life of servitude...
How would I protect the data for different users? - hidden $hare$ with the standard windows UAC protection, or even volume mountpoints.