Should I use Hyper-V for a Basic Windows Server 2016 File Server?
I would lean towards virtualizing it since it afford you more flexibility. If the hardware gets marginal, or if there's an issue the manufacturer can't/won't resolve, then you can just do an online migration to another hyper-v server.
Really, the only downsides of virtualizing it are:
- ~4GB RAM less you can use due to overhead
- Potential to use bad things like snapshots for DFS-R (Don't ever revert to a snapshot while using DFS-R. In fact, forget they exist.)
Yes, you should virtualize even considering the overhead. There is no point of running bare-metal server installations nowadays (the only exception is legacy operating systems).
Reconsider using RAID5 on 3TB hard drives, there is a chance you won't survive another long rebuild. Today, RAID5 can be used only with SSDs where it still makes much sense.
Do not use DFS-R. It's inability to replicate open files and awful switch-over logic (DFS-R doesn't know which server has the latest consistent data) can lead to very bad results, especially, in virtualized environments.
Use Storage Replica or StarWind vSAN Free for replication.
Here's an example of using Storage Replica for deploying HA File Server in Stretched Cluster configuration: https://docs.microsoft.com/en-us/windows-server/storage/storage-replica/stretch-cluster-replication-using-shared-storage
And here's an example of how to build active-active HA File Server with StarWind vSAN: https://www.starwindsoftware.com/technical_papers/Microsoft-Hyper-V-2012-R2-Dedicated-SAN-scenario-Basic-2-node-Setup.pdf
Hope it helps.