aye the hosts thing was a "you never know" thing
My next step would be take it out and then re add it to the domain.
make sure you use the ad domain admin account as that ensures it's nothing funny with your admin account.
If that doesn't work try \\servername\c$ that
should always work.
If that doesn't work I hate to say it, it might be quicker to just reinstall the server from scratch.
other questions to ask.
is it a Windows 2000 AD domain or Windows 2003 AD Domain ?
Make sure you're not trying to add a windows 2003 server to a windows 2000 domain as I've heard you need to upgrade your AD to 2003 accross the board before windows 2003 servers are happy there.
Check nobody has installed any screwy software on the server. I know nobody should have but just check the easy stuff first.
With these things it's often some stupid thing that was left out or unconfigured during install that trips you up.
Always start with the DUH! solutions first and work up, as it can save you a ton of work diagnosing something that was actually a red herring all along.
Have you given all the AD Controllers trusted rights?
Are you having any issues with DNS?
M