The problem is that you can only slim down linux so much. If the tiniest possible linux does not fit on your chip, then it simply does not fit, end of the story for linux in this case. However, there are tiny microkernels e.g. with less than 50.000 lines of C code that can fit on such a device + leave some room for a small application e.g. also smaller than 50.000 lines of C that also fits. This is all I want to say. And yes, I agree with all the other points/drawbacks including performance that people mention here.