One benefit of kernel on kernel virtualization is system calls can be optimized straight through, reducing context switching - better than a hypervisor with custom drivers.
I'm not sure that's what is going on here with KVM - but the principle makes sense.
http://www.openvz.org/ does what you want. The PID:s, network interfaces, and the like are all isolated, but you are only running one kernel on the whole system.
I'm not sure that's what is going on here with KVM - but the principle makes sense.