DesktopLinux has written a piece about using a LiveCD as your Linux Desktop – and enjoys Damn Small Linux.
The 4-star LiveCD's are mentioned here.
Damn Small Linux – a small (~50MB) distro developed by John Andrews and Robert Shingledecker. DSL's backup/restore methods are unique in that the user can specify the files or directories to backup and restore. Once done, backup and restore are done automatically by default. A cheat code is provided to allow you to override this feature. In effect, this cheat code allows you to be pure again. Amen. It's optional to load the entire image into RAM. Needless to say, it's an option that I always select.