I want my system to act as the central system for the rest of my network of 10 PCs. I also want to monitor what's going on, and monitor the activity of other systems. So how can I do this? What are the tools I need to monitor; just using top or any bandwidth monitoring tool is the only thing required, and how can I use my system as a centralized server for rest of the systems?
Nagios is considered one of the best monitoring tools on the market. They also offer an open source version "nagios core" (nagios3-core in the Ubuntu Software Center). Having said that, you might want to take a look at this directory of network monitoring tools.
Take a look at http://munin-monitoring.org/
there are many plugins available and the possibility to write own ones, so you can nearly monitor everything you want.