They're doing a similar kind of thing here in Germany for some years already, you only get a postcard telling you there's a new phonebook and yellowpages available and where to get it. If you want one, you can collect any number you need at the next post office, certain gas stations and in bigger cities at the central railroad station.

I'd rather say they're going to take Picnik out of business just to step on Yahoos foot while ramping up the advertising for picasaweb at the same time ;-)

I hate to say it, but OneNote is really a great piece of software, especially when used on a tablet. There is just nothing like it (that I know of) in the open source world, and I have really searched. Basket maybe comes closest, but it's about 10% of the functionality. The thing about OneNote is that it is not yet another note-taking foo but it allows you to insert just about any document "as a printout", and you can not only scribble into that printout, but due to the built in OCR software you can also copy texts from it.

What you mention is a general trend in IT. First we had a mainframe with dumb clients, then we wanted to use the computing power of our PCs and created rich clients (Windows applications mostly). We realized this is a maintenance hell with versions ever diverging, so we put our applications on the web and had dumb clients again (web browsers). Now, starting with Java applets and continuing with this webserver in a browser stuff, we are on the way to a rich client again. See the pendulum swinging? I'm curious what the next dumb client model will look like, 10-20 years in the future we will know.

Using a version control system should be mandatory anyways. It does not really matter which one, although I also like git best, the most important thing here is to bring your students to getting used to version control systems. They should embrace them as a normal and invaluably useful thing which can be used not only for programming but also for e.g. managing the work on their next thesis paper.
But anyways, that's not the point in pair programming. The point is to sit next to each other and do the work together, at the same time in the same file. If physically sitting next to each other is not possible that's a pity because I think it cannot be as effective remotely, but well, when this is the constraint in your case, you have to deal with it. Several tools have been named already, but not the most basic one: screen. It is installable in every Linux version I know (and of the BSD's at least on OpenBSD) and simple to use. Just make it setuid root, start it on one of the hosts, enter ctrl-a ":multiuser on" and ctrl-a "acladd " to allow access from another user. Let the other student log in to the machine and execute "screen -x". Now they share a shell and each can see what the other one types. The drawback of course is that they are limited to using old-school text editors like vi or Emacs and no fancy GUI editors. On the other hand this has the advantage that they really learn how to program and not only to click together some pretty looking stuff without having any idea at all how it works.

That's just about what I was going to write here. I feel the same and I would happily emigrate rather today than tomorrow if I knew any country where the situation is better. Unfortunately this is a global problem and most of the people all over the world are too uninformed to see what's going on, or worse, they just don't care. I mean look, we got 130k signatures to the petition against that law, which is more than most petitions (no matter on which topic) ever reach, and still it's only about one promille of the people who signed it. This really makes me sad.