The Eee PC, along with similar machines like the OLPC, have been designed with single-child ownership in mind - the child is meant to wander around with their own PC in-hand all day. Machine security/extensibility has been designed with this in mind - the child is free to fiddle with the settings on their own PC as much as they like. I'd investigate either using a Linux distribution more suited to multi-person use, or something like DeepFreeze that can restore workstation images on reboot.
I have read it is much better to stick with the original linux distro that comes with it, which makes sense. For me, I would be quite happy to do this. This would cause some concerns with students using them tho. Obviosuly, atm they have their access severly limited via group policies etc. This will not work with linux and for example I do not want them to be able to get to the console/shell !!
You could provide a small script that asked to user for username and password, then mapped a directory to their Windows-based user area for them. Or you could try exporting their user area as a WebDAV folder.
Even if we solve this problem, is it possible for them to get their home drive mapped when they login the way it is done at the moment via policies, depsite being in a linux environment?