It depends... but yes, in your curent configuration you should be connecting via Kerberos.
As for documentation, here is a Microsoft KB article on the subject:
How to use Kerberos authentication in SQL Server (319723)
However, your SQL Server should already be configured to use Kerberos. The Service Principal Names should be in place because of the fact that you're running under the local System account (in Windows 2000 this corresponds to the computer's domain account, so Kerberos does work).
As for verifying, from the client, the tool KerbTray.exe can show you the tickets your client has, meaning you can verify you are authenticating with Kerberos.
However, out of curiosity, is there a reason this makes a difference in your case since you're talking about a client connecting directly to the SQL Server?
K. Brian Kelley