Although I don’t work much with embedded systems these days, I’m watching Linux systems (as opposed to specialized embedded OSes) become smaller every year. The ucSimm project is very interesting in this respect: a full-blown computer with Linux and Ethernet in the shape of a SIMM board. Cool!
Have a look at http://www.ibutton.com/TINI/hardware/index.html : a JVM on a SIMM !