Docker, using the nextcloud:stable image (not-all in-one) with postgres, behind nginx, and finally ZFS with 2x modern HDDs for storage. I run the stock apps plus a small handful, and have carried the same database through many versions over the last 5 years.

It’s usable, but definitely not snappy.

The web interface for files is fine. Not instantaneous at all but not a huge problem. I have about 1TB of files (images and videos) in one folder, then varying files everywhere else. I suspect that the number of files (but probably not the size) is causing the slowdown.

Switching to, for example, the notes app is incredibly slow, and the NC Android app is just as bad.

Return for refund or replacement. If you’re even slightly concerned about WD giving you trouble, but know eBay/the seller won’t, just go that path since it’s still available.

Since you’re new, I’d recommend just using the old PC to start and get comfortable. Once you’re sure you want to invest some money, you can either build it buy yourself something more energy efficient if you’re super concerned about that.

As for the best OS, just any server OS will do. I run Rocky Linux which is a RHEL derivative, but you can also try TrueNas or anything else you want. Even Windows Server would work if you wanted to go that path.

There are many paths you can take, and which you go down depends heavily on personal preference and the desired use of your system.