I have exactly the same issue with my system at home.  Worked fine with Hardy 
ltsp but when I installed 10.10 my diskless workstation terminal no longer 
boots.  Does do the "..............done" and then sits forever.  I can boot 
either of my laptops as terminals using pxe so I believe ltsp is Ok, just a 
problem with etherboot.
this is preventing us from updating Ubuntu at work as there we run a dozen 
Diskless workstations terminals, all with etherboot.

Any solutions????

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https://bugs.launchpad.net/bugs/619204

Title:
  LTSP Lucid doesn't work with etherboot clients

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