This reminds me of Ling/Erlangonxen, unfortunately Ling is not a free-software, it's opensource but not a free-software.

And the fact that your operating system is the actual language you're coding with, reminds me of the fantastic project by Niklaus Wirth, The Project Oberon. The project Oberon is a language and operating system you can learn more about it at http://www.inf.ethz.ch/personal/wirth/ProjectOberon/, http://www.inf.ethz.ch/personal/wirth/ and a video by professor Niklaus Wirth himself: http://bit.ly/1ClvKSX