Peet:
Yes, you're correct about the following:
1. The .Spotlight-V100 folders need only be accessible by root, with the exception of the user's home. (Please see my reply to my own post that mentions that root:admin 700 permissions are adequate. Using root:admin 755 won't hurt anything, though.)
2. You must "publish" the index with mdutil -p before the server will maintain its index. Otherwise, each client will keep a local copy of its index locally.
Now, depending on the number of files to be indexed, you may want to schedule your initial share point index publication at a time when nobody else will be using your server. Typically, though, the mds server processes will only consume up to 60% of the CPU load, and I've actually tested this with a blue & white G3 computer acting as a server. Your results with even an Xserve G4 should be better.
As far as I can tell, the client/server Spotlight search interaction works like this:
1. Spotlight does not utilize a separate network protocol or authentication mechanism.
2. When a client performs a search on an indexed and published AFP share point, the Finder passes the search query to the AFP server via AFP. Internally, the server-side AFP server interacts with the server-side mds process to gather a list of results, which are then returned to the client via AFP. Previous versions of AFP supported a similar searching mechanism that simply did not rely on Spotlight.
I can promise you that this indexing procedure does work without generating unnecessary network overload. I've used it with several client setups and continue to maintain it appropriately.
I will mention that if you're experiencing problems with Spotlight searching of AFP volumes like slowdowns, stalls, or AFP disconnections, look at your network topology. I guarantee that you'll find something wrong. I've seen where just having one miswired Ethernet cable on the same network (not on the server or any of its clients) caused random AFP disconnections. It took me two days to track that down, so be ready to do some careful trobuleshooting!