I found the same. It is an all-in-ram distribution, so every docker layer is fully loaded into ram (I think there are 3). The core images must be built on something like Ubuntu. Maybe they have trimmed it down more recently. With something like an Alpine base you could probably get to a few hundred MB ram footprint without any loss in functionality. It would be great to see the bare minimum -- something like busybox+runit/dumb-init. Something with < 100MB footprint would be great for those cheap 512MB vps systems.
RancherOS is separate entity from Rancher. It's their attempt at smallest possible OS for running docker. You may use rancher and never use rancher os.
Said that i personally use RancherOS on t2.micro instances without any problems.