To answer your question - yes, it would be able to perform as a NAS unit just fine to store data on and configured correctly could be a very versatile backup solution for any sensitive/valuable files you might have.
Setting it up, you might want to consider Windows Home Server as an operating system, if you haven't had any prior experience setting up or managing servers before. WHS is a great starting platform for a home server and is a good place to learn. An open source alternative which I would personally recommend is Ubuntu Server, but it does require a little bit of persistence with the command line for setting up things such as Samba, CIFS and the like.
As far as other uses go, you could dedicate it to folding or SETI projects to use the idle CPU power for a good cause, or BitCoin mining if you fancy playing around with new and upcoming currency (although the practicality of this makes it nothing more than an experiment). If you play games you could host a Minecraft or Source-based server for free to play across your LAN. You could even virtualize the entire box using vmware ESXi or Xen to turn it into a hypervisor, giving you a sandbox environment to play with virtual machines and develop, test and break various operating systems you might not otherwise have the resources to.
You're internet connections upload rate would determine what web-facing services you could offer and I strongly suggest you read up on firewalls and securing your services before you expose anything to the outside world. There's a good article here on securing WHS. Go to Speedtest.net and if your upload rate fares okay for your region, you might be able to host a thing or two from it but again, not before properly securing it.
Whatever you choose to do, home servers are a great project to undergo, and I wish you the very best!
(apologies for there being only two links - I originally hard fourteen but superuser decided to not let me post them all! A quick Google on any uncertain terms will yield good results though.)