Run Linux on Hyper-V Server

Hyper-V does support Linux as a guest OS, but being it a Microsoft platform, it's obviously more focused on Windows compatibility; here is the official list of supported guest OSes:

http://technet.microsoft.com/en-us/library/cc794868(WS.10).aspx

It could be worth noting that VMware ESXi is also free, and it has a much broader guest OS support (apart from being the market leader in virtualization and a generally much more mature product than Hyper-V).

Also, Hyper-V Server is somewhat painful to manage if you don't have System Center Virtual Machine Manager available: it has no GUI (the physical console can only be used for basic administration), the remote Hyper-V MMC only runs on Windows 7, and if you don't have an Active Directory domain around, things can get tricky. ESXi is much more user friendly, as long as you have at least one Windows PC (XP or later) where you can run the vSphere Client.

As I mentioned above, Hyper-V is fully capable of running this workload. We have 350 VMs running in production. While most guests are Windows, we do have Redhat and SUSE running as well with the integration components installed. The overhead is no more significant than with Windows guests. There is a lot of discussion about actual overhead of on hypervisor over another. Only your testing will tell if the platform will do what you want.

While the VMM is important in large installs, for the installation you are considering, the included management tool should suffice.