Montana Tech, Butte, Montana, USA
At the CS Department of Montana Tech, we run Debian 3.0 on our two main department servers (one's the nfs server, the other's the main server people use for interactive off-campus logins), and on 11 other hosts set up as a general-purpose lab used by roughly 60 students of three of our courses.
We have no assigned systems administrator, so it was very important that our systems run with a minimum of fuss, day in and day out. Debian 3.0 has lived up to this challenge: the students use our servers for networking assignments, C and C++ programming, and the systems have been trouble-free.
Debian's package system (we usually just access it via dselect) is a big win. Security updates are hassle-free, and our systems meet our current needs quite comfortably. I've used a variety of commercial Unixes, and Debian's packaging system and reliability beats them all, hands-down. (For what it's worth, I've been a full-time systems administrator in both academic and industry settings, so my experience with commercial systems has been both prolonged and painful...)