Based on my hosting experience, listed below are the "show stopper" features
required for hosting companies to offer Virtual Private Servers to customers. 

1) Memory limits - Minimum (Guaranteed), Soft (RSS), Hard (VM).  Provide these
limits to each VServer in /proc/meminfo if enabled.
2) CPU QoS - Better way to provide customers what they purchase in regards to CPU time
3) Context Quotas and Context Disk Limits
4) reboot(2) functionality
(http://list.linux-vserver.org/archive/vserver/msg06152.html)
5) Virtual Network Stack
	- Virtual ethernet support (ie. eth0, eth0:0 inside vserver)
	- Ability to change hostname
	- Manage iptables
	- Manage routing tables (effect, not required)
6) Sub-capabilities - More specifically named needs to be able to run without specifying the --disable-linux-caps configure option.

Wanted, but not required features:

1) Virtualized /proc/mounts
2) Virtualized load average
3) Virtualized CPU usage
4) CFQ I/O scheduler adapted to per-VServer limits

Resources:
FreeBSD vimage: http://www.tel.fer.hr/zec/papers/zec-03.pdf
Xen Virtual Machine: http://www.cl.cam.ac.uk/Research/SRG/netos/xen/index.html

--
Matt Ayres
matta@tektonic.net