I did hear rumours that CIA/NSA used them. It meant no one could steal a computer and take data. Only thin clients everywhere. There were thin client "laptops" too.
Citrix/Terminal Services was certainly worse in the design sense, but from the corporate buyer's perspective (i.e. the only buyer) it was significantly better: They could deploy hundreds or thousands or tens of thousands of cheap, disposable PC's as thin clients, while centrally managing everything that mattered. And unlike Sun Rays, they could natively run Windows applications.
There's a reason Citrix ended up worth $16.5B when they went private a couple of years ago, they were highly successful propagating the thin client vision that Sun championed but fumbled.