That's an interesting idea. I desire for a two TV system, lounge and bedroom are directly over the top of eachother... I want to control the systems with Gyration a remote, P1i Phone and Netpad (N800i).
I have an SP13000 board and was going to use that as the bedroom system, but a single server running two screens is much more appealing.
I have seen and used these devices for extending Video over Cat5e (I have used it to move video from the 2nd floor of a building to the 9th floor and distribution over the entire floor. A run of 200 metres) CatX Video TX 8 and CatXQ Video RX, does sound too and low cost.
so, please let me know how you get on... I have just bought parts to build a quad core hybrid which, if you can get it to work, I may by a different graphics card to also give it a try...
How about VirtualBox (i have no experience of XEN) on one of the screens of a dial head system in full screen, with sound routed to a seperate sound card...? Virtual box doesn't support USB yet so we'd be limited to orbiter control rather than usb mouse control.