We have created an "exam mode" by using a proxy web filter (privoxy) to create a whitelist of allowed websites. All other websites than those on the whitelist are blocked. We also use a registry file to remove all windows programs and menus so there is "nothing" behind the browser: empty Desktop, and no Start menu. The browser is started up in kiosk mode. To set up this exam mode, the student must first login to the computer as usual. A small program is then run on the machine, and the student is logged out. The student then login again, and the computer is in exam mode. No reboot.
Our labs are imaged windows 7 computers which returns to original state when rebooted.