Microsoft Dynamics AX Enterprise Portal supports both Advanced mode and Basic mode installation of WSS. “Advanced” is the recommended approach for production systems.The difference between Basic and Advanced mode of SharePoint is well documented by SharePoint documentation http://office.microsoft.com/en-us/winsharepointadmin/HA011607841033.aspx.
The limitations in Basic mode ( which uses WMSDE) includes lack of sql mgmt tools , full text search , db size etc. WMSDE could be used for light usage scenarios or as dev env and can later be migrated to a regular sql server installation.
Advantages of Server Farm Configuration
• Performance and capacity could be increased by adding additional servers running Windows SharePoint Services and SQL Server.
• Load balancing could be achieved by using hardware or software (NLB) service.