This makes sense. Yes, VMWare have massive "first to market" advantage, and won't be dislodged soon. However, the pieces of the jigsaw until now have been:

SPARC

Hypervisor Virtualisation: Logical Domains (no licensing cost)

OS Virtualisation: Containers/zones (no licensing cost)

x86

Hypervisor Virtualisation: missing - so VMWare (££££/$$$$/€€€€)

OS Virtualisation: Containers/zones (no licensing cost)

I would think that basing it on Solaris/x86 is a pretty good call - not only does it give predictive self healing and ZFS as described, it means dtrace can be used to find bottlenecks, etc. Will this displace VMWare from established shops? Absolutely not. Will it enable Sun to ship boxes which are "virtualisation ready", yes. Will it provide a virtualisation platform under a Free Software licence? Yes.

I look forward to getting my grubby fingers onto the previews.