Yesterday and today, I built a system completely based on dietlibc (mostly). It uses dietlibc as C library and several components from www.fefe.de. And: the system just rocks!
The memory usage after boot and first login is 3.7 MB of RAM, which is so awesome. These 3.7 MB include a kernel of 750 kB (that's the size of the vmlinuz image, which is actually compressed), 4 instances of fgetty, a running sshd, and properly mounted filesystems. The time it takes from the last kernel message to the login prompt is less than 1 second. That is due to the fact that the minit init system is not based on shell scripts, but only compiled code, which makes it extremely fast.
After installing a few more utilities I think I'll be able to make it completely self-hosting.