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Introduce the Topic
Explain to your students just what constitutes an "urban legend". You may start by asking them if they've ever heard the story about the Kentucky Fried rat, or the dog who was choking and was found to have a burglar's fingers stuck in his throat, or perhaps the woman who tried to dry off her poodle in the microwave. You could also include a more contemporary variant, introducing the topic of internet hoaxes - i.e. the little boy dying of cancer who needs to have one million people forward a certain email.
Whether your students have heard of such legends and hoaxes or not, you will need to read a few examples of the different types of urban legends to make sure they have a good understanding of just what types of stories are being discussed. A good source of print urban legends are the series of books by folklorist Jan Harold Brunvand, including "The Choking Doberman" and "The Mexican Pet". You may also, if you are web-savvy, go online to print out examples of urban legends that have been transmitted via email, on websites or in newspapers.
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Discuss the Similarities
Many of these urban legends have similar elements. In many cases, ranging from the oldest of orally-transmitted tales to the newest forwarded emails, the story is said to be guaranteed true because it happened to a "friend of a friend" of the narrator. Another element many urban legends have in common is a sort of a morality element, i.e. the Hook Man who only targeted couples who were illegally parked (and engaging in other naughty activities) up in a "lover's lane" of some sort. Another element is that of warning the listener (or reader) of some terrible danger that may befall them - a claim which, in nearly all cases, proves to be entirely without basis in fact.
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Select Urban Legends
You may have the students choose their own legends, either from print or online resources, or you may (for younger students) choose to assign legends or provide a short list from which they may choose. Again, depending on grade level, you may supply the print or online resources you'd like students to use, or you may ask the students to discover what they can find out on their own. Either way, you should ask students, individually or in small groups, to select one particular legend that each will work on.
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Research The Urban Legends
Ask the students to research the background of their legends. Have them describe the history of the legend - is it a recent one, or does it date back decades into the past as many do? Some urban legends may even have roots that go back centuries, while others are as modern as (and often connected to) the latest headline news. Have students gather as many details about their particular legends as possible, including any possible evidence that the legend is in any way true or proof that it is entirely false. One particularly good resource for this is the website snopes.com.
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Present Findings to the Class
Have each student or group of students present their findings on the chosen legend. If you wish to incorporate a technology element and you have the resources to do so, you may encourage them to create PowerPoint presentations. If you have an insufficient number of computers, inadequate software, and/or no overhead projector, you may, instead, choose to have them add a visual element to their presentations via the use of posterboards. They may create their posters illustrating various elements of their legends or create collages using newspaper headlines (real or simulated), copies of emails, photos, etc.