My setup:
Server:
HP DL 560 G1 with 6GB RAM and 4 Xeon 2.20 GHz CPUs with HT
Debian Squeeze 6.0 i386
uname -a: Linux main-server 2.6.32-5-686-bigmem #1 SMP Thu Nov 3 05:12:00 UTC 2011 i686 GNU/Linux
LTSP 5 installed using apt-get install ltsp-server-standalone

Client:
Dell Optiplex GX260
Booting from EtherBoot floppy

Issue:
When power on the client, boots from floppy gets DHCP address OK, says it is loading pxelinux.0, then it prints serveral screenfuls of dots (.) and "done" at which point it stops, there is no network activity on that computer and nothing related since the DCHPACK in /var/log/messages

If anything is not clear, or if more information is needed, do not hesitate to ask.

This should help:-

http://www.debian-administration.org...etwork_booting