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If you want a truly diskless environment, I suggest you use an HBA (HOST BUS ADAPTER). IntelPRO1000 is a cheap network card that I use for iSCSI remote target booting. You could use a small drive to bootstrap an iSCSI session with, but it would be more trouble than it's worth.
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Is it possible to install Ubuntu 10.04 to an iSCSI target and boot from it? ... Do live examples exist?
Yes and yes. A blow-by-blow install using OpenSolaris ZFS targets can be found at:
1the link is dead D: – nc4pk – 2012-11-08T18:30:34.983