My first reaction would be a low level language such as C/C++, what is interesting is eyeOS, actually does a bit of both. They develop in PHP, but then use HipHop to compile the PHP down to C++ for performance reasons.
Another thing I've seen in the past is Virtual Machines via a Java Applet. Again, you have a more low level language being used (Java) to serve up the environment.
Personally, I really don't think there is a big market for Web OS anymore, at least not from a business standpoint. There aren't many applications you would be able to run, sure you could do e-mail, basic word documents, spreadsheets, etc, but when it comes to real business applications needed for day to day use, you don't have a web variant that would even be close to suitable.