If you virtualize applications then there will be no real benefit for using your new operating system, it just adds complexity and degrades performance over running natively and will hardly be able to make use of features setting your operating system apart. Maybe you could really attract developers but that would not change anything fundamentally, normal users wouldn't come until the developers have native and better replacements for applications users want to use. It just shifts the burden a bit from you building the operating system and the applications to you building the operating system and other developers hopefully building the applications. It won't change the amount of time and money required, maybe even increase both because it is no longer a single concerted effort.
He's saying if you built a new innovative OS with cutting edge OS research. The OS itself would be great to use and fast and have tons of features,etc etc...and you use virtualization for other things that aren't compatible.
Right. The virtualization is just a way to allow you to use the legacy applications you need while they are phased out in favor of the new hotness.
Of course, that'll get you nowhere unless the new hotness really is so much better that cost/benefit of running it, plus oldOS in a VM, is greater than that of just running oldOS.
