I played with "The OSKit" (http://www.cs.utah.edu/flux/oskit/) this
weekend.
  
The result is a bootable VM (x86 only), based on EmbeddedSqueak.
Text-mode command-line only, I've put a diskimage of a bootable
1.44MB floppy at http://www.ira.uka.de/~marcus/SqueakOS.image.gz
  
zip:    http://www.ira.uka.de/~marcus/SqueakOS.image.zip                        
Source: http://www.ira.uka.de/~marcus/SqueakOS-src.tar.gz

Building the Boot-disk:

Linux: dd if=SqueakOS.image of=/dev/fd0
DOS/Win: use rawrite, ftp://ftp.ira.uka.de/pub/squeak/demo/rawrite2.exe         

The SqueakOS-Kernel is only 440K:

-rw-rw-r--   1 marcus   marcus     454619 Oct 10 22:15 zImage

This includes the 600k embedded.image!

   Marcus