it works very well. one problem i see could be compatibility issues (for users not used to the penguin’s OS). it is enough for browsing, e-mail, office… i sometimes use DSL on my xbox and it is great. i dont think this system should be used as a permanent solution though.
You might want to consider something like this instead ncomputing.com/ncomputing/index.php
With a decent enough machine, you can hook up 10 users to one PC with those, but I don’t know if they’re any good…
The other thing you could do is get some IDE to CompactFlash adapters and plug into a PC and boot of those, they work quite well, but remember that all flash memory media has much shorter life span than a hard drive.