If you install the /xterminals/root using RedHat 7.0 packages, you will end up with non working terminals. You will get an error message early at boot going like this:
FATAL: can't find command interpreter
The solution is to apply RedHat glibc patch. Download the glibc update (you need it for your server anyway) and do
rpm --root /xterminals/root -Uvh glibc-2.2-12.i386.rpm glibc-common-2.2-12.i386.rpm
You can get updated glibc from ftp://updates.redhat.com/7.0/i386
The terminals will work.
Edit the file /etc/X11/fs/config and at the end, comment out the line "no-listen = tcp". Then you must stop and start the service (restart won't do it) like this.
/etc/rc.d/init.d/xfs stop
/etc/rc.d/init.d/xfs start
After doing that, if X is running on the server, you are better to logout and restart (Application will become erratic).