Tim Chapman discusses your iteration choices in SQL Server 2008 and explains why determining which option performs better depends on the situation.

I'm not sure this is possible (I have googled it, and came up empty), but we are building a new server to house a payroll/HR app and this will be running on Windows 2008 Standard and SQL Server ...

SQL server will allow zero-length strings without issue, as long as your datatype supports it. Just assign the string value of ('') and you're done, no headaches.

If you ever need to sort character strings stored in SQL Server fields, check out this demonstration of how to write a common sorting algorithm using SQL Server TSQL code.