Rackmount servers are invariable _loud_. If you've never worked around them before, you're in for quite a surprise. Forget about quiet drives - it won't make the least bit of difference.
There is a distinction between rackmount server and rackmount NAS (Network Attached Storage) that is being missed here.
You are talking about a 1U rackmount
server, which I agree is extremely loud, however the NAS system we were looking at is a very different animal. 1U rackmount servers have
10 to 20 40mm fans that scream at very high RPM. This particular NAS has 3. That is a substantial difference. Additionally, there is no hot Xeon server processor to cool, only a simple flash-based microcontroller that
doesn't even need a heatsink. The WD Green hard drives run very cool, so cooling is even less of a concern. It is possible the OP will want to purchase 3 quieter 40mm fans, granted, but the NAS is going to sound like a Toyota Prius in comparison to the 1970 Dodge Challenger with straight pipes right out of the hood that a 1U rackmount
server would sound like.
NAS device (the QNAP one discussed earlier - 3 fans):
http://www.techwarelabs.com/reviews/servers/qnap_ts_409u_turbo_nas/images/ts-409u4.jpg
Intel SR1500NA 1U Rackmount Server Chassis (
At least 12 fans - probably more that you can't see, and this is just a "barebones" chassis with no processor or anything else installed):
http://www.newegg.com/Product/ShowImage.aspx?CurImage=11-102-015-01.jpg&Image=11-102-015-01.jpg&S7ImageFlag=0&WaterMark=1&Item=N82E16811102015&Depa=1&Description=Intel SR1500NA 1U Rackmount Server Case
How do the stand alone units cool themselves? With larger diameter and quieter fans? I thought the idea was that these run really small CPUs that just direct network traffic...
Most of the standalone ones are passive cooling for the drives, and maybe one small fan for the power supply. The two hottest things in a PC are the video chipset and the CPU. In a server it is the CPU. NAS have neither of these. Power supplies get hot, but we can't live without them, so they always have a fan or two. Hard drives get hot, and often need a fan to extend their life, but they don't need one unless they are the super fast screamers. Most of the time the power supply fan will pull enough air over the hard drives that it is the only fan that is needed, and it is probably 40mm in most single and dual drive NAS standalone solutions.
Maybe I will have to keep it out of the rack afterall.
IMHO, you shouldn't abandon your original idea quite yet.
I guess I would say that the noise is going to be there if you want a rackmount NAS, and I wouldn't want it terribly close to my seating area as it would add some midrange frequencies of ambient noise that might take away from the listening experience. A remotely located solution is good, but since you want a clean rackmount solution, don't shy away from what we discussed too quickly. It won't be as loud as a server by a long shot.
With the WD Green HDDs, $20 worth of easy fan replacements (if that were even deemed necessary), and a few strategically-placed pieces of Dynamat to reduce the case vibrations/harmonics, I think that QNAP device we talked about would be pretty dang quiet!