Now you need to know both the OS they chose and the OS you chose...
(No, I don't believe it'll be 100% hands-off for the host. This is an early stage product, with a lot of custom parts, their own distributed block storage, hypervisor, and so on.)
I wouldn't have picked Opensolaris, but it's a lot better than other vendors that are either fully closed source, or thin proprietary wrappers over Linux with spotty coverage and you're not allowed to touch the underlying OS for risk of disrupting the managed product.
GNU/Linux was also "risky" at some point.
This appears to be a much better system than VMware, is free as in software, and it builds upon a free software operating system with lineage that predates Linux.
I say this in the most critical way possible, as someone who has built multiple Linux-based "cloud systems", and as a GNU/Linux distribution developer: I love it!
In hindsight of course it was remarkably prescient. This from a guy at a company that was built entirely around SGI at the time.
The first time I actually saw GNU/Linux powering something in production was in 2003, when I joined CERN and they were replacing their use of Solaris, and eventually alongside Fermilabs came up with Scientific Linux in 2004.
Later at Nokia, it took them until 2006 to consider Red-Hat Linux a serious alternative to their HP-UX infrastructure.
Yes they are using illumos/Solaris to host this but they don't sell on that, they sell on the functionality of this layer — allowing people to deploy to owned infra in a way that is similar to how they'd deploy to AWS or Azure. How much do you ever think about the system hosting your VM on those clouds? You think about your VMs, the API or web interface to deploy and configure, but not the host OS. With Oxide racks the customers are not maintaining the illumos substrate (as long as Oxide is around).
You could be right about demand, there is risk in a venture like this. But presumably the team thought about this - I think folks who worked at Sun, Oracle, Joyent, and Samsung and made SmartOS probably developed a decent sense of market demand, enough to make a convincing case to their funders.