This vmdebootstrap command will set up a minimal Debian Jessie in a 4GB image file, with networking, sudo, the usual Debian live user and ready for running in kvm:

Code:
sudo vmdebootstrap --image net_test.img --size 4g --enable-dhcp  --sudo --user=user/live --log test.log --log-level debug --verbose
It gives a login console, from where one may proceed. The necessary packages for running a minimal X11 environment in kvm seem to be:
X11-server-utils, Xorg, xserver-xorg-video-cirrus, xfce4, xfwm4.
In addition, I have installed editors, iceweasel, rxvt-unicode (terminal urxvt), curl, ssh etc. Compressed, it will be about 350MB.
It is easily booted in kvm
Code:
sudo kvm net_test.img -m 1024 &
And X is started with old startx.

Instead of running (vm)deboostrap several times, this image can be copied and modified. E.g. changing to sysvinit and introducing Knoppix packages. When a robust procedure is found for this, debootstrap can be modified (to "knxbootstrap") to produce exactly what is needed.

It can also be used for making a squashfs image - but I haven't seen form the sparse documentation how to do this after the initial image creating process.