how about one where there are other specific guidelines?

for example i thought something like this would be cool:
autodetect, boot straight to 24 or 32-bit graphics
stick figure font renderer
show keyboard and mouse input

well... games?

well, how about different levels? no pun intended.

like a basic one could be the version i described
intermediate vesions could build up to what you
describe

You forgot to add, it also should plays CD's .
Take alook at CdPod http://board.flatassembler.net/topic.php?t=2164&start=50
But then again it does not have a mouse.

suggestion for a contest (with, however, NO RELATIONSHIP to restriction on length, i.e. nothing to do with 512 bytes):
1. start from dedicated primary partition on hard disk, created using RANISH, managed with XOSL (Thanks Bogdan, for teaching me!)
2. measure time needed from selecting boot choice to completion of boot, by displaying sign: BOOT FINISHED, FASM NOW WORKING....
Of course, the sign can not be displayed until the boot process has been completed. If some version of FASM is not available to the user, upon completion of boot, then, if SOME OTHER ASSEMBLER, of any variety is extant, together with an editor, of any kind, linker to be capable of executing ANY program, then FASM itself need not be present. User timing the boot MUST be able to create ANY kind of simple ASM program upon completion of boot, to represent a valid entry: for example "Hello, World!". Further, user must be able to SAVE both source code and executable on the same partition, in a subdirectory, created after the boot. Nota bene: ANY kind of assembler.
3. Timing: hmm. If this submission boots faster than can be measured with a stopwatch, we may need to consult with Abrash: "Zen..."

i like those ideas.

i was thinking that space could be saved by storing source code only. the compiler could toss the bytecode into RAM at compile time, unless of course the user thought too much time passed during compile.

i really like the idea of having an assembler at your fingertips when os boots.
i'm glad to be seeing feedback on this 'new os category'.

of course it's decard's contest, and i like the idea of the 'do whatever you want' in the 512 bytes.