I know that smaller flash chip == cheaper, so...

A bit off topic, but you might be able to use PXES (mentioned somewhere on this forum), remastered with an openMosix kernel? PXES is only 5MB, though you could off coarse boot it using PXE (network boot). Don't think the server is going to be quite happy with ~25 thin-clients. openMosix won't help you that much, since all I/O needs to go though the server.

I don't know what purpose you wanted to use Flash for booting? Speed? I think using a dedicated Knoppix PXE server with loads of RAM (so it can cache everything) would help more. And that would be pretty cheapo compared to 25x ~1000 EUR for the Flash drives. btw, since you better not put the swap on a Flash drive (writes wear the memory), you would probably need lots of RAM on each machine already.