Hardware can be abstracted away by a hypervisor, as it's already done in most use-cases since a significant amount of machines are just cloud VMs nowadays. The only API the "hardware" has to implement is VirtIO (which real hardware could also start implementing if needed).

This kind of fork would of course mean death to the Linux desktop, since the only reason the Linux desktop is relevant and (somewhat) modern is because it's enjoying the improvements that are made to Linux by companies who primarily use it on servers.

If this fork happens, this VM-based distro is what enterprises will switch to and build upon, with conventional Linux being relegated to niche use-cases with much less activity and manpower.