Comment 2 for bug 573207

Confirmed. Using Ubuntu 10.04 LTS alternate install CD, booting and then press F4 -> select "Install an LTSP server". This is what I have in my /etc/ltsp/dhcpd.conf (I don't manually changed it at all):

#
# Default LTSP dhcpd.conf config file.
#

authoritative;

subnet 192.168.0.0 netmask 255.255.255.0 {
    range 192.168.0.20 192.168.0.250;
    option domain-name "example.com";
    option domain-name-servers 192.168.0.1;
    option broadcast-address 192.168.0.255;
    option routers 192.168.0.1;
# next-server 192.168.0.1;
# get-lease-hostnames true;
    option subnet-mask 255.255.255.0;
    option root-path "/opt/ltsp/i386.tmp";
    if substring( option vendor-class-identifier, 0, 9 ) = "PXEClient" {
        filename "/ltsp/i386.tmp/pxelinux.0";
    } else {
        filename "/ltsp/i386.tmp/nbi.img";
    }
}

After removing the ".tmp" suffix from the above file, my LTSP clients began to start perfectly.