MLS Classified, secret, top-secret, and so forth. Building a complete multilevel system for Unix is far too big for a final project, but there are a number of interesting sub-problems you might consider. Add security labels to the file system and to users and build the appropriate security checks into the kernel. Measure the bandwidth of various timing channels . This could be anything from modulating the system load, the disk load, the virtual memory load, or even the cache hit rate.
Firewalls Add firewall-style support to an operating system.
You could try developing application-level gateways for several of the common protocols. You could also look at building an efficient router. Rather than just hacking away, you might also look at the software engineering aspect and look at some kind of firewall architecture that has inherent strengths against attacks on any of its protocols. Too many Unix tools are setuid root. Clark-Wilson recommends having certain types of data files restricted to only being accessible by certain programs.