That is a good start, but the original poster appeared to want graphical apps to run in the VM; JeOS is console only (as one would expect for a server/appliance distro). It would be interesting if there was something between "full Ubuntu with lots of widgets" and the console-only JeOS.
Yes, one could add the gui afterwards, but something minimally configured already would be a timesaver...
There are images of VMs floating of base installs of various linux distros. If this is too big, just configure JeOS with your basics and clone that image as needed.
If the original poster is looking for a VM to distribute an application, JeOS is a reasonable place to start.
On the other hand if the original poster wants to run a VM for every application he will (likely) want to look for a VM platform that dedups memory, a la ESX (though that's a bare metal server hypervisor)
If the original poster just wants a secure enivornment to run apps, something like VMware ACE may work better which allows you to lock down/filter access to USB storage, network, etc.
He wanted external X. That's already supported natively by SSH. Just install the app, and run ssh -X to have it forward the display to the local machine.
Yes, one could add the gui afterwards, but something minimally configured already would be a timesaver...