Containers are not isolated from host system. They are separated. Isolated containers will have performance and features similar to User Mode Linux.
What I actually meant is that I'd rather run an isolated (separated) process from other processes and the file-system space (and the other isolation features which cgroups are giving us), not meaning isolation from the host system.
With the cgroups/namespaces it's a process isolation (or separation, whatever wording you prefer). In the Linux kernel documentation they also use isolation wording. ;-)