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We are developing our own application Infrastructure to develop custom web applications for our customers which go around having standard web functionalities like CMS,locallization,Authentication etc....

Custom application can be any line of business/B2B/B2C application over web. Application can cater both intranet/internet user. It is not neccessary that all custom application requires standard features provided by WSS expect CMS,localization and search

Should we consider using WSS as core framework to develop our application infrastructure? more importantly what we can not expect WSS to do for us

+1  A: 

You need to give more information on what you are building. How many users are you trying to cater for? Are these applications going to be accessible over the internet? I would strongly recommend that you install WSS for yourself and evaluate the features and the costs.

WSS provides a basic collaboration infrastructure over and above the services available for ASP.NET. Licencing costs can be quite expensive for internet use, but that is relative to your revenues. Features like publishing are only available in MOSS so your CMS/localization requirements may not be satisfied with WSS. Authentication is provided in ASP.NET and WSS simply provides a mechanism for managing users and setting authorization.

BrianLy