I would say something like Git might fit the bill:
Have a look at this site Git Magic or, even this tip site GitReady
Second the choice of Mercurial
Advantages
Disadvantages
Subversion is easy to install, on windows, linux and mac os x. I don't know what program they are programming in, but the subclipse plugin for Eclipse is fairly easy to install and hides away some of the repository complexity.
And repository complexity? That's simply having a trunk, tags and branches folder within each project anyway. And they might not have much time, but they should get the time to learn SVN (or similar) because it is a skill that looks good on their CV.
I'd suggest looking at Fossil - It's a single executable with no dependencies to run, operates all traffic over HTTP, keeps its all repository data in a single file which can be named anything, and includes version controlled wiki, bug tracking and a web-server out of the box. Oh, and it's completely distributed.
I would recommend Mercurial (also called 'hg'). It is a distributed open-source VCS, and needs no central repository. Using it day-to day is easy. There is enough documentation on official site. For example check out QuickStart.
Deciding point for me was a great GUI for Windows - TortoiseHg. It seems it is also supported on Linux (didn't try myself). And of course there are command-line distributions for most Linux versions.
Of course it seems easy from this side of the fence, maybe for busy students concept, advantages, and everyday operation won't be that easy to get used to. But in the end, instant commits, ability to revert to any revision and create a new branch from there automatically, and intelligent diff/merge are just irreplaceable.
Hope this helps!
For real ease of use for your students, you could install a SVN server with autocommit turned on, shared using webdav. This way they can just mount their directory using WebDAV and will autcommit every time they hit save - accessing the history is easy with TortoiseSVN, the Eclipse / Visual Studio Plugins or some web access solution like ViewVC. For your access restriction needs you could use the integrated subversion authentication (look here) - which uses a simple configuration file for fine grained access control.
Configuration has become a lot easier (and there is better documention now - have a look at the SVN Book), but could get a bit coplicated if you need multiple separate repositories with access restrictions and a web interface.
Autocommit is more a solution for the "my office worker / boss" who has no clue whats going on inside a computer needs version control for word documents. Students taking a programming course should perhaps also learn how to use a decent SCM anyway.
Git and Mercurial would be nice because of their distributed nature, which makes sharing easy - but both tools lack GUI interfaces which are really easy to use (TortoiseHg looks promising, and gitk is a very good Repository browser, but your students would still have to wrap their heads around the command line tools to make full use of the tools). Also the concept of distributed SCM's is a little more complex to grasp.
On the pro side you could use public hosting solutions like GitHub and wouldn't have to worry about a server setup. This also makes sharing solutions really easy, but would break your "only with each other" requirement. But I guess you won't be able to stop them from exchanging code anyway, in my experience with course work I found looking at the code and verifying that it's unique is the only way to prevent copying.
You could also use PlasticSCM, which has really nice interfaces for a lot of IDE's and (at least the site claims) free licenses for educational institutions.
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