Hi!

Is this feasible? What would be the complications to be expected? and
the benefits? Can this be accomplished by IT students with limited
knowledge in linux but is willing to learn and explore? If one
customizes an existing distro, can it be considered as another separate
distro?

I think this sort of thing is much within the capabilities of determined students nowadays.  The trick is really in defining the parameters of what you want them to achieve. One way this could feasibly be done, given a semester's time, is to customize something like Slax or DSL, preloading it with customized modules and personalizing the screens, etc. 

Any tips on where to begin. Have googled for this subject, but it seems
the how-tos are geared toward those with advanced proficiency.

--
Dominique Gerald M. Cimafranca
http://villageidiotsavant.blogspot.com
Dumaguete City
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