I don't mean to cause a big stir on these forums, but I was wondering if there was a way to run an embedded Linux OS on an Arduino from external storage, such as an SD card.
Embedded Linux would be more appropriate for a Gumstix or Beagle board. The Arduino is pretty limited and you'd need some sort of pico kernel as opposed to a micro kernel. 
Maybe a CP/M port of some sort?
Discussion on embedded OS for ATMega16