I'm having a difficult time wrapping my head around this. If Joyent wanted to stick with a UNIX then why not FreeBSD and help implement KVM there? Wasn't XEN already available for Dom0? I just don't see much mindshare in Illumos/SmartOS for keeping up with current server hardware drivers. I really would have liked to see one of the existing BSDs benefit from the time they've put into this project.
Obviously Linux already has KVM, and there are new implmentations of DTrace and ZFS. Btrfs is not too many more kernel releases away from being considered stable(fsck being a glaring problem) and if you want container-based virtualization you've got LXC(some prefer OpenVZ).
With that said, who is their target audience?