What are your thoughts on installing a KMS server on a DC? Any drawbacks?
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It's not a big deal. Licensing is such a tiny application, and the attack surface is a single port on a service I've never seen a vulnerability for (though you may want to double-check on that). If you can, go ahead and make sure it's 2008 R2 so that Office 2010 KMS/volume licensing is supported.
Hyppy
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I've done exactly this. As Hyppy said, it's a very low impact application as all it is doing is passing data through. Do be careful of KMS versions, though as there is some variation. I ended up running one on 2003 and another on 2008R2 because of what they each were able to license.
sysadmin1138
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