Sounds like dynamic save state utilizing the HDD, is what I'm reading, I don't like the mention of Games VM not having full direct access to the hardware though, that's more overhead compared to the 360 unless they optimized it to the point where it's more efficient, but I doubt it as I think they are just trying to provide a friendly dev environment for the studios like what they did with Windows on PC.

Not really.  At the very least, the Blu-Ray drive is virtualized.  This way Microsoft can ensure only certain software can run. 

In the Xbox 360, a DVD drive could be flashed to allow pirated games to run.  With Xbox One, if you could flash the drive so pirated copies of a game could be read, the virtualization may still require that information to run the game.  Sans that piracy check, the virtualized hardware fails, thus the game won't run.

I can't see that happening utilizing the HDD with fast switch between both... have to be memory.

It'd only be a matter of time until people fuck with the VM though, I don't have a problem with VM personally, I think the idea is good for a dev environment, just not on a performance level.

They don't have to cache all the APP VM content in RAM, they just need the basic services like UI and current layout and cache the rest on the HDD. Game VM would obviousy use more, but it's supposed to anyways so it's fine to cache all the Games VM in RAM.

The performance hit for VMs on AMD-V processors is low single digits already, plus Dave Cutler is supposed to be working on very low overhead virtual drivers for the X1 along with a streamlined version of Hyper-V so the actual hit should be almost non existant.

Lets just say that 10% power reserved for the OS rumor exists for a good reason, it's never "non-existant," rather how low you can keep it. I just hope console overheads don't continue to grow since they are almost PCs at this point.

Doesn't the overhead include the app VM as well as the Hyper-V? I'm sure I read that somewhere.

dont fully understand why its different then any multitask feature PS4 has

because it is not really multitasking we are talking about.... it's 2 VM running next to each other.... but those VM can multitask (several apps running in the app VM for instance) what's nice here is if one VM completely crashes it won't affect the other, that's one of the perks and it allows in XB1 case to have totally different kernel for both OS in VM which means you can bring different code depending if it's a game or an app....
not sure about PS4.... but that doesn't downgrade the PS4 qualities in multitasking it just enable more things in the MS ecosystem (win8 apps probably) not really change much for Sony....