I think this project is very cool and has nearly countless applications!! We are going to be setting up our own single board, fanless computer using the beaglebone. We will setup a mini SD card so that we can boot Ubuntu onto the beaglebone, we will setup a a lightweight GUI (graphical user interface - a desktop environment vs terminal) and just for kicks we will install the arduino programming environment.
Even though this board is heavy on linux, I included this in the microcontroller section in the hopes of more arduino fans giving this board a whirl..,
I chose ubuntu because there is already an existing image to format your sd card. Also, I have been running ubuntu on my laptop to program arduino, so it seems natural that you would try and match the os from your board and your computer.
I would recommend joining the group "beagleboard" on google groups. The beagleboard is much more complicated than an 8bit microcontroller.
This instructable is basically an editorialized repost from the linux website: http://elinux.org/BeagleBoardUbuntu
If you have any knowledge or interest with linux, or beagleboard, please sign up and contribute to the beaglebone group on instructables. There is a lot to do here folks!! http://www.instructables.com/group/beaglebone/
At the end I have included how to set up a lightweight GUI so that you can SSH in from your laptop and set up a "virtual desktop." I also show how to install and run the arduino IDE so that you can use the beaglebone to program any arduino NOTE: I HAVE NOT CONFIGURED A DEDICATED SCREEN OR A KEYBOARD TO THE BEAGLEBONE. I JUST WANT TO ILLUSTRATE THAT THE PROCESSING POWER OF THIS BOARD IS MUCH CLOSER TO A COMPUTER THAN TO AN ARDUINO.
A good next step would be to figure out the HDMI cape so that you can run the LXDE desktop on any hdmi monitor.