On behalf of a student who just finished up the internship search: Companies/recruiters, please note the advice put forth here.
A couple of points I'd like to touch on:
* Be sure to provide your interns with a ton of guidance, and promote this in during your recruitment process. Many of my fellow students are turned off by the bigger companies since they feel like they won't be able to make an impact. As a smaller company, this is your ace in the hole. Use it to your advantage.
* Personally, exploding offers leave a bad taste in my mouth. Everyone knows how long the recruitment process takes, and you should give the intern the common courtesy to make an informed decision. The last thing you want is a disgruntled intern on your payroll for a few months.
* You should consider internships as an investment. Build a relationship with your intern, and it will pay numerous dividends in the long run. They might return for a full-time position or they may refer a friend that they respect. A good way to support your intern during the school year is to sponsor a hackathon or an interview workshop at their school. This gets you face-to-face with some of the most motivated hackers at any school, where you can begin the courting process.
Just some quick thoughts from the student's side of the table.