Central Admin running as local system account isn't a good sign.
You don't need Office on the server.
If everything is going on one server, install the free version of SQL 2008 express or 2005 express.
Install MOSS and choose Advanced install - Complete. You need to create some Active DIrectory accounts before hand, at least one for "farm account", and one for everything else (if this isn't a prod environment). Just read through Technet.
Here'sguidance:
http://technet.microsoft.com/en-us/library/cc303400(office.12).aspx
