Ask HN: Any Hosting with tiny dedicated machines instead of VPS?

The SheevaPlug post yesterday reminded me of what I really want from a hosting provider, and since we've been thru the age of the blade, and VPS is all the rage right now, I wonder if some innovative host has come up with it:

A tiny dedicated machine. EG: A blade or a rack system with a bunch of independent very small machines. Say and ARM CPU, and 512-1GB of RAM and an onboard, dedicated SSD of 10-40G. Since this is an all silicon solution it should be smaller than anything using hard drives.

I'm picturing something like the gumstix. (Maybe someones done this with gumstixes in fact.) You could probably fit hundreds of them in a 4U Rack enclosure. Power supply would be separate, off the shelf, and stick a network switch in there as well and provide a separate NAS for bulk hard drive storage.

This would be pretty ideal for a lot of hosting situations. Fast local storage (the downside of the shivaplug is the USB hard drive interface) and dedicated resources at low power and low capital costs.

I know VPS is more efficient in theory because most people are idle most of the time. But there are thousands of VPS providers and this would be an interesting differentiation.

Anyone doing anything like this?