When setting up a game server for Debian Jr. (using Debian Woody) does the
sound chip on the server need to be working for sound on the terminals? My
guess would be 'no' but that still is a guess.

I'm using a box with an IWILL KK266 mobo with a C-Media CMI8738 sound chip.
I have yet to try to find a driver for it.

Mandrake has in the past easily got the sound working on this board.