My question is; can Virtual Center Server 2.5 be installed on a W2003 server that is not joined to a Domain?
If the install is possible what are the drawbacks and or implications?
Depends if you use AD groups / users to login to vcenter. Otherwise you have to use local accounts for vCenter to provide user access to your vCenter cluster. Adding the vCenter to the domain would make this easier in the future to add / secure users.
and yes you can join vCenter to the domain at any time, but it requires a reboot...