Wikipedia has a rather dismissive section on the flatworm memory transmission experiments. Even The Straight Dope has taken a shot at this one. A search on flatworm and memory will throw up a lot more info but it looks like the Wikipedia summary is fairly accurate.
The fact that the story appears on both the Straight Dope website and Snopes (here and here) suggests that despite dubious scientific evidence it is being passed around more in the form of an urban myth. You might like to think of experiments you could do to work out exactly what mechanisms are at play here (observer bias, 'trails' left in the equipment, worms on 'smart drugs' etc.)