Could you attach your dhcpd.conf, or dnsmasq.conf? Particularly, the "filename" 
directive that corresponds to the client vendor-identifier "Linux ipconfig".
Also, a change concerning the lts.conf path has been submitted upstream a few 
months ago, if you still experience the problem, could you try replacing your 
/opt/ltsp/i386/usr/share/initramfs-tools/scripts/ltsp_nbd with this one:
http://bazaar.launchpad.net/~ltsp-upstream/ltsp/ltsp-trunk/annotate/head%3A/client/initramfs/scripts/ltsp_nbd
and then updating your nbi.img?

** Changed in: ltsp (Ubuntu)
       Status: New => Incomplete

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lts.conf unionfs overlay does not work from old etherboot ROMs
https://bugs.launchpad.net/bugs/181012
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