I am new to TFS 2010 and wanted to give it a fair try for a small project with a team of 2-3 remote people.
Is it a requirement that all my team users are part of an Active Directory network setup? or can I have my team-members to be loosely coupled and be able to login using username/password?
No, Active Directory is not needed.
Just give everyone of your users a username/password on the machine where you installed TFS. On the machine they may be "normal" restricted users.
If you use WebAccess or otherwise want to privilege your users, dont' forget to give them the proper rights in the Team Foundation Administration Console. In the Tree, select "Application Tier", then in the respective options, add the users you like as "Administration Console Users".