You need a cluster here.
An extremely powerfull server  that can server easily all your clients will always
be a single point of failure. Immagine 500 people calling in the same hour your IT
stuff because the server went out.

You need a cluster.
Depending on your budget you could use two IBM S390/Zseries (500000$+ per standard
server) or a cluster of independent servers - http://www.idg.net/go.cgi?id=671252 -.

Go for the architecture you have experience with. I mean even if alphas are
powerfull, use only x86 if you are used to use them.

You could use (this is how I would proceed):
1 or 2 p133 as your dhcp server (BBC uses 1 dhcp server per 33000 users -
http://www.linuxplanet.com/linuxplanet/reports/1176/2/ - and has one ready in case
of failure of the first one). The rescue dhcp server could also be the nfs server.
On nfs server, where all /home stuff would reside, with RAID5 scsi disks and a raid
controller with a lot of ram cache, one dedicated nic per application server 100Mbps
(or 1000Mbps if possible but not necessary) and a twisted cat5 connection between
the nfs server and each application one with no hub or swich in the middle.
People seem to have happily used 200 clients on a single server so I would recommend
for your 500 clients using 6   2way x86 application servers (ltsp servers) with  2~4
Go ram per server (we use nt4 servers with 2xPIII500 Mhz cpus, 1Gig RAM and RAID5
fast SCSI2 disks per server per 20 clients, citrix inc. says we could server 40
clinets with the same machine). These should have fast scsi swap disks. When run as
mosix cluster nodes, the application servers could also load all the / stuff from
the nfs server, easing the maintenance.
Configure your dhcp server so clients will be divided in 5 or 6 segments with each
segment starting X sessions from a different application server. A lot of things
allows you to do load balancing (use dns instead of ips: the fastest available app
server will respond first; xdmcp chooser: people will see which server have the less
users connected and use it; I think round-robin dns will respond whith a different
ip each time it is requested to do a dns lookup and could be used for load
balancing) but remember that you are running a cluster and thus all the load will be
shared by the different nodes at execution time (the cluster will self manage its
load).
As people seemed to be distracted and slowed down by the KDE2 interface, I switched
to ICEwm (a lot faster and does not make any difference as people use the window
manager to load apps with mouse clicks and not to work with it).

Hope this helps you.
Fathi Ben Nasr.




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