You might you have read it already, but people at http://www.colinux.org/ have made great progress at running Linux (the kernel) natively under Windows 2000 and XP. They already have (the japanse) Knoppix-JP working on it.

It might be a nice feature (yes, I know, space the final frontier) to have a minimal XFree86 Cygwin installation on the disk and some little executable to start both Xfree86 and colinux to run Knoppix.