The first order of business should be upgrading your domain controller since apparently SharePoint 2007+ doesn't play nice with this legacy version of AD (
http://msmvps.com/blogs/obts/archive/2006/09/27/143844.aspx). If that's not an option before your install of SharePoint, you'll need to do the following in order to use any domain accounts for the various SharePoint service accounts (required if you're building a multi-server farm).
Disable domain digital encryption on all SharePoint servers:
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Navigate to Administrative Tools > Local Security Policy
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Expand 'Local Polices'
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Select 'Security Options'
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Navigate to the 'Domain member: Digitally encrypt or sign secure channel data (always)' item within the main display pane and right click > properties - disable.
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Repeat the previous step for the 'Domain member: Digitally encrypt secure channel data (when possible)' and 'Domain member: Digitally sign secure channel data (when possible)' items.
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RESTART ALL SERVERS (This change will not take effect until the relevant server is restarted.
This should alleviate the problems with locating domain users based on their 'friendly' Netbios name rather than SID's. Without this change you will receive the following error when trying to provide domain account credentials for the farm service account while running the SharePoint configuration wizard:
The username is invalid. The account must be a valid domain account.
In addition, when trying to add a domain account login to the Sql Server instance you will receive the following error:
Create failed for login…Windows NT user or group domain\username not found. Check the name again.
Couldn't find any documentation on the 'net regarding this obscure scenario, so I wanted to share my insight. Disclaimer: I'm not a sys-admin so I cannot comment on the security compromises that this change might introduce.