The FreeSoftware Magazine just came out with an issue that explores how to set up a Linux terminal server system for a school using the popular Edubuntu Linux distribution. This system is one that I have covered in the past. I have experimented with the system and found it fairly easy to install. Unfortunately, it did not like my old computers's built-in video cards.
FreeSoftware has done an excellent job describing the benefits and process for installation. Worth taking a look if you have old computers that need to get used in some productive manner.
FreeSoftware article on Linux-based thin clients