Open terminal and install ltsp-server-standalone:

sudo apt-get install ltsp-server-standalone

Open and edit /etc/ltsp/dhcpd.conf - by default it's configured for a server at 192.168.0.1 serving PXE clients.

sudo gedit /etc/ltsp/dhcpd.conf

Build the thin client:

sudo ltsp-build-image

Install openssh-server - this should be already installed!

sudo  apt-get install openssh-server

Update SSH Keys:

sudo ltsp-update-sshkeys

sudo ltsp-update-image 

Start DHCP3 Server:

sudo invoke-rc.d dhcp3-server start

On Ubuntu Desktop 8.10 the dhcpd3-server does not starting automatically after restart due to the new networking tool. How to solve this, read DHCP3-Server on Ubuntu Desktop 8.10.

Configure default DHCP interfaces - edit /etc/default/dhcp3server. Not sure if this step is required?!