which OS is appropriate for an educational institution?

This might not be the most appropriate group to post this question,
but I couldn't find a better one. If you know one better suited for
the question, please do mention.
Where I work (an educational institution in India), there are some
1000 or so machines all running on pirated OS (Win XP Pro.) and all
full of pirated software. There is no network other than a dozen or so
interlinked in some labs etc.
I would like to suggest to my employer the risk of relying on pirated
software and some way out. I would be suggesting them to purchase
genuine OS and do with free software for the rest of the purposes. Can
somebody tell me the best Microsoft OS for such an institution? Even
if the employer chooses to purchase Win XP, the lack of Internet
connectivity would not allow constant updates. (XP without security
patches is the most vulnerable of all MS OS?) Most of the machines are
entry level with 128 mb ram. Does XP have a leaner version than the
Professional thing popular in the pirated circles?