Right now I use Aqua and Spaces on OS X Leopard. There's an application called "Desktop Manager" that looked and worked more like I wanted, but the developer gave up on it after Spaces was integrated into Leopard, and Spaces is not unusably bad, just not as good.

This video shows how it works: http://www.youtube.com/watch?v=c7MHup6kXbU

I'm sure there's some VM program that works like this in the X.org world, though.