The Raid 1 gives exact the same data on both disks. Each one is exactly the same.
For example if you had two exactly the same computers and two hardives, put both harddrives in one box and establish a mirror set, then break set and put one of the drives in the other computer they would be exactly the same. (Vendors and IT guys use to do this alot but there are better ways now). The reads and writes get completely duplicated to both drives so you get continuous full backup. Replacing the failed one in software is as described above, and is fully explained in Win Dooz Help. Each hardware solution has a procedure specific to the controller, some have bios interfaces, some GUI programs, whatever dosen't make a lot of difference as they all try to do the same thing. Which one is best is usually left up to reviews.
Yea it is failsafe, what happens exactly at the moment of failure using Win Dooz I can't remember. It may want you to break the mirrorset before you continue, might depend on the kind of failure (drive or controller channel) as well. Again each controller is different and each tries to sell their benefits and abilities.
Sorry if I'm giving you some stuff that dosen't apply but you mentioned File Server and I equate that to speed most of the time.
Lots of advantages over the Ghost use as you described it, except performance.