Linux has been doing thin client terminal servers for quite some time. I had a setup at my last place that used ltsp and rdesktop to make some old p120's with 32megs of ram and no hard disk attach to a windows terminal server directly on boot so to the user other than the lilo screen at bootup there was no way to know they were not on a windows desktop.
This was 3.5 maybe four years ago. With the crap help desk have to go through supporting desktops *of any kind* thin clients are just waiting to happen but until MS releases them its not going to catch on because of licensing issues, and market inertia..
Come to think of it were you not just saying you were going to give Ubuntu a shot they are looking for feedback.. http://wiki.ltsp.org/twiki/bin/view/Ltsp/LtspBreezyTest