I\'m looking for advice on a really small linux distro that I can run inside VirtualBox without killing the host system and that can also run the latest Sun/Oracle-Java.
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http://susestudio.com/ seems like a good fit- Java, Postgres, and nothing else is a fairly uncommon configuration. Alternatively, starting with Debian minimal, apt-getting what you need, and then redistributing the VirtualBox disk image is a good/quick option.