This is what Microsoft Research's Singularity OS did, with the language being C#. Their argument was that the MMU's address space isolation was a 30% Unsafe Code Tax so even if C# was slower than C if they could get the slowdown to less than that it was still an overall performance win.

I'm pretty sure the discovery of Meltdown/Spectre and similar speculative execution attacks would completely wreck this model. The fix for those exploits has been to make the isolation barriers even stronger but if you don't have them at all you're wide open. If you had such an OS but then had to split it back into separate address spaces you've now lost the performance gains and just have a slower OS that is harder to develop drivers for.