Windows Server Core

With Windows Server 2008, Microsoft at last released a "real" server OS with installation type "Server Core" without unnecessary graphical features in the server OS to get a smaller footprint of system resources (less disk and memory) compared to a Full Installation.

There are absolutely no reason to install Full Installation mode of Windows Server 2008 if it isn't really necessary when the service/feature/role is supported on Server Core.
The only real argument for not installing Windows Server 2008 (R2) as Server Core is that the role/feature that shall be run on the server isn't supported and can't be run.

Server Core gives less maintenance and less resource requirements than Full Installation. As there are less features installed on a Server Core box, it gives much less patching and higher uptime. With less features, there are less security holes making it a more secure server than a Full Installation. Except of the initial network configuration and patch management, the most management can be done the same way on a Server Core box as on a Full Installation box if using the remote management tools.

Limitations

With the first release (R1) of Server Core there were some limitiations that has been improved in R2 release of Server Core. There are still limitations in R2 release causing some applications to not be able to be installed or run.
PowerShell depends on .NET framework, which wasn't included in original release, and could by that reason not be installed in a native way. A workaround for R1 is described in Dmitry Sotnikov's blog. In R2, powershell is installed as a native feature (ocsetup MicrosoftWindowsPowerShell).
Some roles/features like Terminal Services/Remote Desktop Services server roles are not supported on Server Core and can't be installed.
Applications depending on .NET Framework may fail to run due to the framework included in Server Core R2 is partial of the Full Installation (some parts of presentation layer is excluded).
Server Core has except of some basic tools like regedit, calculator and task manager no big GUI on the server and might propably scare some people when they only find a command prompt window when logging on the server and not able to point and click around in a regular Windows Explorer or start menu.

MMCs nead to be run remotely from a full UI box like Windows 2000/XP/Vista/7 or Full Installation of Windows Server 2008 (R2). Some tools, like DNS Manager, can't be used on the earlier operating systems (2000/XP) because the tool has switched communication protocol.

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