Hey there WillW,
This should be a pretty good NAS. WD Red are great drives for this.
I wouldn't keep the OS on a USB stick because it would be too easy to remove it by accident and thus corrupt your data.
Have you considered a pre-built NAS? They are much easier to set up and manage, plus you get support. I could suggest checking out WD's solutions and see which ones can cover your needs and budget: http://products.wdc.com/support/kb.ashx?id=W1wnwz
You can take a look at WD My Cloud Mirror: http://products.wdc.com/support/kb.ashx?id=WyzeBh
Feel free to ask if you have any questions
Captain_WD.