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I wonder if it'd be possible to provide a virtual display to a small ARM board and embed it into a window, so that you'd have the virtualization effects (two OSes on one machine) without the speed loss

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I think it's possible do to so, I remember seeing this ARM USB/HDMI board, which apparently can mirror the screen over USB: http://www.fxitech.com/technology/any-screen-ip/

Not sure how well it works, though.

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