I have approximately 20 DevonIT Thin Clients with almost no hardware resources to speak of. The current OS is outdated and will not connect to our Server 2008 R2 and Server 2012 systems over RDP.

I need to find something that will install onto a 128 Mb local "hard drive" (flash) and run with 256 Mb RAM.

I've already checked out TinyCore (which is AWESOME), but the version of Remmina that is available through the Apps manager is 0.9 something and has serious issues with an American keyboard layout. Both older and newer versions seem to work properly.

Any suggestions would be greatly appreciated!

Slitaz

There are specialist distros: a check at Distrowatch reveals Thinstation and K12 Linux.

As said check on Distrowatch. Anyway slitaz, puppy and damn small could be for you.

Not sure if you can get a 2XOS on it but look at it too.

What makes the present OS outdated? The RDP version?

Perhaps instead of changing the client OS you should change the server OS so you can control the protocol being used. With GNU/Linux, for instance, you can use RDP but you can also use X11 over SSH, NX, etc. If you have a local LAN, you can use plain X11. You may have to change some of the apps running on the server but you may have to do that from time to time anyway. The longer you wait to take charge of your infrastructure instead of allowing it to control you, the less costly climbing out of the hole will be. Remember, M$ is motivated to make your life inconvenient every few years so that you will buy more licences. That is not in your best interest. With GNU/Linux on both ends, no one can pressure you to waste time and effort.