Hi everybody.
I'm not going to partecipate to this great challenge so I'd happy to share with you some suggestions, hoping the whole community can be enriched by the best virtual appliance possible.
Some of them are based on what I already read on other posts or emails arrived me.
Creating a multiporpuse all-in-one virtual appliance could be a temptating path but 25% of your vote will be influenced by this aspect.
Also you have a limit of 2GB.
A virtual appliance doing greatly a single job is much more appreciated than one doing many job in a poor way.
2) Contemplate to write a new application[/b]
Distro ultimate customization is an easy approach but won't help you winning the challenge.
In the same way, taking an existing liveCD distribution and recreate it inside a virtual machine isn't exactly a great effort.
Try to be original.
3) Focus on benefits of virtualization[/b]
Virtualization isn't just having a ready-to-go self-contained server, to avoid too many packages installed on your host OS.
Virtualization is also bringing a technology where it's not available (e.g.: a Linux/BSD/OpenSolaris feature that Windows users cannot have).
If you find something achivable only with virtualization you're already half a winner.
4) Focus on killer technologies[/b]
The more you'll provide something useful today the more votes you'll receive. Pretty obvious, huh? 
Today's hot technologies are VoIP, multimedia centers, documents sharing/collaboration (not just P2P), endpoint security, internet content filtering, privacy defense.
5) Consider enterprises as audience[/b]
Choose carefully your audience. VMTN community is made by a large amount of enteprises administrators, not just self-employed professionals.
A virtual appliance for an enterprise audience could bring much more benefits than expected winning the challenge.
Trimming down your virtual appliance isn't just a suggested step dictated by judging criteria. Is also a mandatory process to grant security.
Be sure to put real effort on security, mostly if you are targeting enterprises.
7) Reconsider VMware Tools role[/b]
VMware Tools provide a lot of features you could use for innovative use of virtualizaiton.
I'm thinking about drag-n-drop for example...
A lot of hacks for VMware Player appeared since its release, to add multiple network connections, to create new disks, to change virtual network interface card.
Avoid them and stay with standard features, permitting everybody to enjoy your work immediately.
This work isn't just for money. VMware will promote your work in many ways using it as indirect, viral marketing. And 3 months to do something great aren't that much.
Evaluate to join forces to create something really unique.
10) Simplify your development lifecycle[/b]
If you are not so proficient in Linux distros customization, or simply you want to speed up ideas evaluation, evaluate the use of online service rBuilder I covered in this post:
http://www.virtualization.info/2006/02/assembly-your-linux-operating-system.html
Good luck to everybody!
Alessandro Perilli, CISSP, MVP
http://www.alessandroperilli.com
Blogging about IT Security on http://www.securityzero.com
Blogging about Virtualization on http://www.virtualization.info