> Maybe we've just been doing it wrong the entire time and we should just log into our single-user desktop computers as root and then spawn our shells and other applications as various unpriviledged users as necessary (this could easily be scripted in launcher scripts). I wonder if anybody has attempted to do that, but again I don't expect that Xorg would work very well in this configuration.

Replace '...as various unprivileged users' with '...as completely isolated virtual machines' and you've got the gist of what QubesOS does. I haven't tried it personally, but it sounds really interesting.