This is highly relevant to my interests.
The ingredients: I rescued a to-be-scrapped laptop from Free Geek Vancouver (a Pentium II-450mhz Dell, if I remember) to provide most of the guts.
It's running Debian, with most of the boot scripts neutered and a custom script dropped in to start X, run Driftnet, and hide the mouse.
I think that salvaged laptops make lousy picture frames. They run hot, draw an unconscionable amount of power, their power supplies tend to be the first thing to go, and they contain moving parts. The more-awesome way to build this gizmo would be to port DriftNet to a jailbroken AppleTV, or to one of those wallwart-computer dinguses. See also Newstweek.