On the other hand, being able to install software so easily with package management is a huge benefit of distributions. Perhaps the solution is to create a new package management system for a desktop distribution. A system which ensures that when upgrading an application only its personal namespace (libraries etc) changes, while other applications remain untouched. Libraries are second-class citizens, almost. That way we get the benefits of packages and libraries, but each application is logically isolated from changes to any others.

I very much agree with the idea of a slow-moving core, though. That's how I've tended to use Debian: a stable foundation upon which I can install less stable higher-level software (the things I actually interact with). Of course, this doesn't address the distro fragmentation problem Ingo is talking about.