You're missing the point. There is no single file operating system for desktop users (maybe VxWorks or some other embedded OS falls into that category, but those aren't really for desktops). Modern operating systems sprawl all over the disk. Memory protection and multitasking are not large features, and CS undergrads all over the world routinely implement them in less a semester.
> It's possible to run linux from a few megabytes of ram.
A few megs of ram and a directory in /etc filled with startup stuff and config files. Clearly you don't appreciate it, but there was something really nice about being in the root directory and seeing only command.com and config.sys. The entire rest of the machine was yours to setup however you liked. The things most people hated about DOS really had more to do with the 16 bit address space and segmented architecture.