Your server will need more RAM, 1GB is simply not enough when using rsync.
The 1TB WD-green is a slow consumer drive. It will be much more prone to failure.
Your clients will swamp your server, assuming Gigabit network infrastructure.
Now, this being said, once your initial fulls are done your setup will work. But I would(at a minimum) put a second backup drive in and create a RAID-1 if your backup data is at all precious to you, and at least another 1GB RAM, probably more if possible.
Best of luck.