Picture and Picture
 

Is it possible or feezible to create a Picture in picture system? The thought is to have a dual boot system that can have two OSs running at the same time. Basically like the old PnP televisions where you can switch back and forth the frames?

I'm sorry, but I don't understand what you mean. Could you re-phrase what you want?

Explaination
 

Have a Linux system running. But on the desktop you can open another window in which a secondary OS runs, like Mac OS/X or (don't hate me) Windows. Then have the ability to work in both and switch which system is running in the window and which is running fullscreen.

Not totally sure, but VMware sounds like what you want. Alternatively, use Wine to run windows applications on Linux.

Yes, I think you should take a look at the various virtual machines. vmware is widely used. Parallels is the new kid on the the block. Also see qemu. There are other too.

Xen looks very promising, but you need a special version of the OS kernel to work with it, so until Apple or MS release a Xen capable kernel, no cigar.