Paul,
The VM I've created is 200Meg compressed. No X/Gnome/etc... but w/ftp connectivity. It includes the entire openACS stack, including CVS setup. I've experimented with including the desktop tools, and the VM goes to ~ 800Meg. I think someone who knows what they're doing could probably slice it in half by eliminating unnecessary packages, but either way it's going to be huge. Posting it the the openacs.org site is a no-brainer, paying for the bandwidth is a different matter.
To address the bandwidth issue, I like the idea of using a p2p framework to distribute the VMs (read my web page @ http://www.pobox.com/~johnseq/oasis/about.html for a more in-depth discussion. ) I haven't identified a simple one that's reliable open-source/free and cross-platform yet, but BitTorrent is probably the closest.
Sourceforge offers user-mode-linux downloads (the same idea, just linux-VM-on-linux only) of complete operating system installs. They'd probably support an OpenACS VM, but I haven't looked into this too closely.
Anyone have any ideas for download hosting of big files?