What is the best option? - Can we setup a Windows 2008 R2 enterprise and restore the server with /recoverserver switch - what are the issues if we do upgrade by running setup - is there any other option

There is not a lot of data - only few mailboxes. What do you mean by swing migration to temporary system?

Also, we will move the mailboxes to a different server - so there is not much risk of losing data but I wan to make sure that server would be healthy and no issues would result from using one of these options to upgrade

A swing migration is exactly what you have said - move all data to another server. Then remove the original server correctly using add/remove programs. Wipe and reinstall Windows and Exchange. Simon.Simon Butler, Exchange MVP Blog | Exchange Resources | In the UK? Hire Me.

you can try change edition of Windows without reinstalling - DISM /Online /Set-Edition:ServerEnterprise /ProductKey:<product-key-of-ent-edition> Of course backup of Exchange config requiredRegards, Konrad Sagala, MCT, MCSE+M, MCITP: Exchange 2007/2010

Hello, After you finish upgrading, you need restart the exchange services. Best Regards, Lisa