ASA 5580 - AD / XP SysPrep And Automatically Creating User Folders

I've only worked with 7/asa5580 in an Active Directory setting. Sysprepping to clone those machines with default profiles with unattends was very easy, but XP is a different story. I'm now faced with moving several buildings with XP machines to a few Server 2008 R2 boxes, which all will all be in one location. There are around 700 machines but this will be a building by building process, maybe 100 at a time over the course of a year or more. Moving these machines to Win 7 is not an option. There are several buildings but they are all in the same town, all connected with fiber. I do not manage the physical network. My plan is to just offer each user thier mapped network home drive and possibly redirected folders. I'm just keeping it basic.

How important is it to sysprep these XP machines after I do clean installs? I've heard it's very important but also know a lot of people on AD that just clone machines without sysprepping. I've heard not sysprepping can screw with WSUS, but in the years up to this point the machines on Novell have been cloned without sysprep and WSUS worked fine.

Also, will Sites give me the advantage of forcing groups/buildings of machines to authenticate to a specific DC? Otherwise I only know of Sites to allow you to control the replication between servers over WAN. What other benefits is there to using Sites for each building?

If I'm running a few DC/FS's, how to handle DNS? Each server that needs DNS installed will have it installed per requirement, but as for configuring the workstations DNS settings, should I dedicate one server to DNS or have two, or something different?

My last question is about folder permission inheritance. My previous experience, I created a folder inheritance system where when the user was created, their home drive pointed to a folder using \%username%, and a folder would be automatically created, give ownership to the user, and inherit permissions to only view that folder and no one elses. It works brilliantly. My problem is that when I use group policy to deploy folder redirections, I couldn't figure out a way to automatically create folders. I ended up pointing the redirection policy back to their own home folder. It ended up working out OK, but whenever the users look in their network drive they could see the redirected folders.