1st. I don't see that many bugs in the TCP/IP, filesystems, etc. specially those exploitable by black hat hackers, specially remote exploits. We usually see wide-spread vulnerabilities in the middleware like OpenSSH, which is in the userspace, putting everything in the app is not going to solve that, quite the contrary, we need to wait for the library maintainer to fix the bug, for the applications to integrate with the newer version of the library, and then, update all the applications.
2nd. Side-channel attacks. I'm not really confident in letting applications have that low level of hardware access. I mean, it's really easy for one application to steal the resources from another. We need authority if we are sharing peripherals. Well, we have one peripheral already that is shared by processes, that's memory and look at the mess that is a modern MMU and all the attacks on those that we have seen throughout the decades.
3rd. If we are going to implement that as a shared library, the result is exactly the same as today's micro and hybrid kernels, if we are not going to save memory and implement that as a static library, it's exactly the save as virtualization.
Correct me if I'm wrong.