Hello!

I have been trying to complete a school assignement:
I've done that. But the issue arises from one other caveat:

I've chosen Slitaz, installed a few packages and a decent browser (Firefox), and built the iso.
But if running it in VirtualBox, it throws a kernel panic if I have a VM with less that 1.5GB of RAM.

And I try to resort to a low ram iso, using Tazlito:
And the following error appears:
running:
and then
outputs
I even tried to mout my iso, but still couldn't convert to low ram, but I managed to do it once before.

Tools used:
Virtual box
slitaz 5.0 rolling

Any help is appreciated.

Create a command line distro from any base with the necessary tools..... (?)

Slitaz should really be light enough for your requirements, with room to spare.
I suspect you pulled in too many heavyweight packages and desktop environment components.
And when you start up Firefox it might easily exceed 1.5GB. Right now, after surfing LQ for a while and currently 3 tabs open, my combined memory usage is ~1GB - Firefox the largest part of that for sure.
Slitaz comes (or used to come; I think it's a little outdated now) with its own very lightweight browser.
Another lightweight yet modern option: surf.

Do you have swap set up?

Solution:
Redo the whole thing, multiple times until it worked.
Sometimes works, sometimes doesn't. Go figure. Assignment near completion, luckily.

Managed to get a distro without Firefox or Opera (my first choice) and managed to get a distro that runs (as low as I took it), in 512 Mb or RAM.

That suffices for our project.