It's pretty much dead now, but Microsoft Research had a project called Singularity (http://research.microsoft.com/en-us/projects/singularity/). It's an entire OS implemented in Spec#, which is a subset of C# + Code Contracts. It was built so that contracts between programs could be statically verified when compiled, allowing applications to all run in the kernel's address space.
Well, if the JVM was the basic layer of the operating system, then yes. But really it's some form of Linux, there's a lot of native code running, system calls, user and kernel mode etc. Apps can use native code too.