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"So why not make a "slimmed-down" Linux for them."

I'm having a similar discussion on another front, though the issue is modular tools in general, not merely Linux.

First response is that Red Hat (and SuSE, IIRC) allow you to roll out different configurations of Linux, including some relatively basic workstation configs.

The kicker though (these aren't my words, I'm your view) is that people will frequently (often?) go for the gusto and install absolutely everything. Especially first timers. We've been told that more is more so often that "less is more" sounds false.

IMO, stripped Linux installs will be the only way to roll for a corporate desktop. The home user, however, will probably feel cheated if that's the way it's presented. However, existing products such as the Cobal Qube, Trinux, and the Netwinder are in fact tailored Linux distros, so you're predicting the past to a certain extent.

Things will work out eventually.