Virtualising 12 servers is going to be tough with £8k, but not impossible...
You'll need a minimum of 3 bare metal hypervisors (with as many CPU cores and RAM you can squeeze), and a storage array. I'm not sure if a blade array is you best bet - typically seen them used for rolling out desktop virtualisation, but wouldn't totally exclude them in your early investigations.
If you are users are doing heavy I/O workload over the network (such as Garageband to network home folders or rendering video or 3D graphics) the you are best to use a fibrechannel SAN (which will frazzle your budget!). Otherwise a good iSCSI NAS device would fit.
As for the virtualisation - VMware VSphere with VMotion etc would be ideal but check the hardware compatibility carefully and the licensing options for Edu - the cost could stack up... I have had very promising results recently with a test lab running Ubuntu Enterprise Cloud - and it's fully EC2 compatible which means you can expand onto Amazon's cloud, if and when required.
So to conclude, you could set up a virtual infrastructure for your 12 servers within your budget but it would be tight and it come will come down to how much you are willing to take on yourself v's paying the appropriate £s to others in order to have the security of their support.
