[Milawe]

If they have coding experience, I think your mud idea would be great. You can email the administrator at Archons of Avenshar. I know he had a really awesome Python code base going that he made available a few years ago. I have only begun poking around with DIKU, so I really couldn't tell you what the best thing to do is there. Tons of people could help with that, though.

I think, though, if it's mostly a writing assignment, you could very easily go the pen and paper route with a bit of computer thrown in. You could go as far as to do it all as a Power Point presentation which could seriously be a lot of fun. It'll also be pretty, teach the students how to use Power Point (which can be very helpful in the business world), discuss game design, and allow for creative writing. If you want a really serious project, create an entire Pen and Paper gaming system and then a world to support it.

Anyway, in an attempt to answer the questions you originally asked...

1) Try mailing admin AT avenshar dot com. Otherwise, you could look into the DIKU route. I've been told that building on a DIKU is a matter of learning how to script. You can learn that pretty quickly.

2) You could try coordinating with your comp-sci department and let them host a server for you. Otherwise, there's several mud hosting places, I think, that you could try.

3) Have you guys thought about trying to create a game or even a world on a Wiki? You could do a choose your own adventure thing, and Wikis are insanely easy to set up if you're not looking for something complicated. It would be fun, focus on writing, and be inherently collaborative.

Hope that helps!