Along similar lines,
Windows XP from a bootable CD,
<
http://www.nu2.nu/pebuilder/>
Linux from a bootable CD,
<
http://www.knopper.net/knoppix/index-en.html>
You'd still want your MOO directory/files on a writable filesystem, though.
This sort of thinking can be taken further (to the extreme?) with some commercial products,
2000-XPlite,
<
http://www.litepc.com/>
VMware Workstation,
<
http://www.vmware.com/products/desktop/ws_features.html>
However, I think we're exceeding the scope of our little project
TBC