I don't think you have provided enough information for someone to really answer this. How long does it need to keep 60 students entertained? A week, a month, a semester?
Are there particular ideas, concepts or technologies you are trying to teach and hence need to design a good problem around for them to solve?
e.g. searching / sorting algorithms, writing multi threaded code, applying software design patterns, building GUI's (SWT, SWing, WinForms, WPF etc? depending on your language of choice)?
There is so many things to choose from.
Do they need to, or are you trying to teach unit testing (nunit, xunit etc.)? Mocking frameworks (Moq, Rhino mocks etc.)?
Whilst I don't have a direct solution for this I'm trying to get you to think a bit more about how you might structure your question. If you are going to split them into groups into working on a large problem maybe you can come up with an idea that involves
- One group designs a schema and builds a backend database(s)
- One group builds one or two WCF web services (optionally with unit tests)
-- Maybe one group could build an OData web service whilst another a traditional rest service
- One group builds some of the design patterns that may be employed (e.g. Repository pattern to decouple technology infrastructure)
- Maybe one group could build a very small website with basic authentication that performs auth. with the database, and pulls data from web services developed by another group?
But again, I don't know how long this project is for what sort of skills they have (what technologies / subjects they have learn't/taken and what your trying to achieve with this project). Hope this is of some help though.