How are you going to graphically hook users into the server? Via VNC or something else? How are you going to limit CPU time per user account so one person compiling doesn't hog up all the CPU cycles for hours on end? How will you protect files? FileVault is not recommended for use with programming/compilation because it slows down the process due to the need to encrypt files.
Plus a lower-end Xserve can easily run $4,000+, this seems like an expensive project. While its an interesting idea, I personally don't see how it is technically or financially feasible.
http://www.aquaconnect.net/?page_id=26
As for file security, I'm sure I will be able to find or make something.
The apple Xserve is £2500 here and data centre hosting will cost me around £40 a month.