Just wanted to share something with you
If someone wants, I can try to provide patches I used. It's just chrooted Debian with Xephyr launched on main X server (with proper window name) and everything else launched inside that Xephyr server. I've used Matchbox as DE and patched matchbox-desktop to work as I want and to provide finger scrolling with libmokoui2 from Openmoko. I had to compile few things by myself as they weren't available in Debian repositories (but were in Ubuntu or Maemo, so it was easy to compile them for Debian armel).
In future I want to be able to send Debian to background and display some small, non-intrusive window in case of notifications (new message of smth).