Hmmm, strange - Windows Home Server is based on Windows Server 2003. Unfortunately I haven't got one to test with. Do you use a localized version?
Do you have sufficient rights to all the Mercury files and directories?, and if you have any antiviral software installed turn it off during testing.
If nothing works, a last shot could be to install Rolfs HTTPServer to manage user accounts.
The only way I can get Mercury to act as you say, with a beep, when creating the user, is if the maildirectory c:\mercury\mail\peter already exists, but that peter doesn't exist as a user within pmail.usr. Meaning, the local user dialog will fail if the maildrop directory can not be created.
So you can open pmail.usr with notepad, and compare the list with the directory structure - but do not alter pmail.usr manually.
Kind regards / Peter