yes, you can setup ad on linux. if you go the ldap route, it relies on an existing windows ad farm. however, if you go the samba4 route (still in development, but getting pretty good http://news.samba.org/) you can setup, run, and manage the whole thing from linux.
however, since ldap is such a pita to setup, i'm pretty sure you can find something easier to setup that will use windows' ldap to authenticate. samba3 will authenticate with ad (username=domain/user,password=password,workgroup=domain).
what i don't know is what drupal uses for authentication. if it uses linux, i'd look for a pam module.
Sounds like I would need a dedicated server for this. This client has regular shared hosting...