@Paul_Murphy
I understand that read-only media is a potential solution, but you then have to worry about updates, as even an OS on a R/O media may contain bugs that lead to information leakage or access problems during the running of the system.
If you look at most Live disks, you normally have a degree of persistent storage, because the Live CD is normally overlaid by a UnionFS, often stored on USB memory device. This allows users to keep information after the system is shut down. If you have persistent storage, especially if it allows browser tools or extensions to be installed, then the system is still vulnerable.
And you also assume that you don't need to install printer, network card or display drivers. I don't know how often you use a Live CD, but whenever I have, I have found it a seriously disappointing experience, being slow, and missing support for anything that is slightly out-of-the-ordinary (like the non-free Radeon and Nvidia drivers to accelerate display performance or a lot of wireless cards).
Using Virtual Machines only works if you use fixed boot images (otherwise you are just exporting the problem into the virtual machine), and if you are talking about server farms, only in a large environment with some trusted support to maintain the infrastructure. It does not help home users, and would be seen as just another level of complexity to configure. And my point about persistent storage above is still relevant.
I have thought all of these things through, and with the current user expectation of control over their own PC's, none of them are really workable.
If we could have a highly trusted read-only image, that did not contain any bugs and also had everything that a user might want forever, then you could propose such a solution, but this is a Utopian view (and you know that Utopia means either "good place", or more likely "no place").
Google, with ChromeOS are trying this, but we need some more work exposing 3D graphics acceleration and abstracted sound and other device layers to be exposed in the browser to make it acceptable for even modest gamers. I am not going to hold my breath for a port of Crysis or BioShock onto Chrome OS.