SCO

If your software is copy protected, then it is highly unlikely that restoring the system from a tape backup will allow you to run the application, as the inode numbers will be different.
Option 1 to continue duplicating disks will work, although you will only be able to restore the data files.
Installing a new system is no where near 20k unless you have a hundred users. I have done 5 in the last 18 months, and the most expensive was 3k. Including one with copy protected software.

The 20k was updating to Windows Server and New version of App. (current version is at least 20 years old)

I just got some additional information. A bit more about the App and copy protection. Quoting maker of software:

"To get our programs and data files to work on Unix, Linux, or Windows we use another layer of software, which is a compiler from a company called Basis. This compiler is what's tied to the Unix system, and the license key is most likely tied to the MAC address of the hard drive. You were very lucky for a number of reasons that when you lost the old system the hard drive was still intact and you found an identical box."

I did not realize a HD had a MAC address, but if I am reading that correctly, backup as I am trying to do is a moot point as the restore will not work on another HD as indicated above. Maybe I am missing something, I can't believe that is correct.

The network card has a mac address, the cpu has a serial number. Of course if the network card is on board then effectively the software is tied to the motherboard. What version of Basis, I have version 1.06 dated June 98.

Well, I am certain the software is not tied to CPU or motherboard as the motherboard on the old server failed and I have already moved HD to another Server and it booted and worked.

After I verified it worked with the replacement MB and CPU, just for the heck of it, I took the CPU and Memory out of the old MB and put in the replacement server to make a powerful Dual Processor 800 Mhz PIII machine with 500 MB ram and 9 GB HD.

It is the common HP E800 server.

There used to be a licencing application which was very popular with software vendors wanting licence control called FlexLM (standing for Flexible Licence Manager). This tied licence security to the MAC address of the network interface. A value was computed on the MAC address which is known as the Hostid.

If your server is running FlexLM it will have a process running the executable 'lmgrd'. See if you've got one of those.

Code:

# ps -eaf|grep lmgrd

When I enter that command, it just comes back to the root prompt # with no other message.

An alternative is to create an image of the disk, and use it to create a virtual system.