The reason I started this. I had a 486DX2/66 left over from an upgrade and I wanted to have a quiet X-terminal while the server makes noise somewhere else.
486 or Pentium best. 16 MB should be the minimum. Put in the best video card you can get for it. Normal NIC should do.
On the server, make sure the DC is matched by a clause in
/etc/X11/xdm/Xaccess and comment out the :0 in
/etc/X11/xdm/Xservers. Then make sure that xdm is run from
the init scripts.
On the client, run X -query server
You will get the xdm login box and then all your X clients will run on the server.
I have been using this for several weeks now.