I got a tip from a friend who works at the local university: they were substituting some of the 'obsolete' PCs for newer ones and the old stuff was going to the dump... I managed to get 4 CPUs with screens, keyboards and mice, really old stuff, but I think it'll do for what I have in mind:

I'd like to set up a small LAN using an AMD K2-500 as server and the 4 'satelites' for some simple html based exercises for my English students.

The specs are the following:
Pentium-MMX 166
32-64Mb Ram
HDD 2.16Gb
Video Card: S3 Savage Virge 86C325 (PCI)
Network Card: Pulse H1012

Given this hardware, I'd like to find a good distro with a lightweight window manager that's intuitive enough for my students to handle and with good old hardware support.

I've tried knoppix and a slack live cd simply to have a look at how the PCs respond, but in both cases I ran into the same problem: I get an error message telling me I 'passed an undifined node number and asking me enter one. I've tried several, but none will give me a working window manager. The only thing I've managed to get it a colourful screen with lots of stripes which looks as if the desktop image is displayed many times one on top of the other and on a different horizontal location.

So my question is, which distro would work out of the box?

On knoppix, you can select a different window manager. Google for "Knoppix cheat codes" off the top of my head, I think it's something like knoppix desktop=icewm at the boot prompt. For a live CD, you'll need to have something like Damn Small. But for the real install, you might try using a very basic install of Debian.

Just out of curiosity, are you talking about the satellites being full clients (i.e. individual desktops) or thin clients (dummy terminals, basically the central server would do all the processing and the satellites are really just keyboards, monitors and mice)?

For thin client setups, look at Edubuntu (you may have to strip it down for your central server) or the Linux Terminal Server Project (LTSP).

I did just that with knoppix, but got a useless unresponsive desktop.

I like the idea of thin clients but I'm not sure the intended server is powerful enough to do that.

The server should both serve the content for the satelites and serve for simple administrative tasks at the front desk

Edubuntu is aimed at the education crowd and has a easy to use graghical thin client app.

SO if Edubuntu can be a thin client server, how do I boot up the thin clients themselves?

Generally speaking, you either have to have a PXE enabled ethernet card or setup a small system (either on the hard drive or a floppy) that can just mount all it's major partitions over NFS.