Where did I hear this before...ah, yes, I remember now:
Stripped-down 'MinWin' kernel to be at the core of Windows 7 and more http://www.zdnet.com/blog/microsoft/stripped-down-minwin-ker...
Stripped-down 'MinWin' kernel to be at the core of Windows 7 and more http://www.zdnet.com/blog/microsoft/stripped-down-minwin-ker...
http://www.codinghorror.com/blog/2006/07/creating-smaller-vi...
Really cool stuff.
edit: s/XP/NT/
That was basically the bare minimum needed to run the OS on my laptop with wifi and sound.
Put something similar on my EeePC 701 when I got it, having a 6/7 second boot time on Windows was quite nice;