I support a more direct approach, especially for an embedded style device.
As for the Distro, I actually really like slitaz, but my preference doesn't address the relevant aspect of your question.
As far as I know, you will have to do some of the system stuff yourself. I would estimate you will need to compile QEMU and some of the relevant libs. This method is most likely available in patches only form, but they do work.
slitaz core, or tiny core, X-less minimal only.
QEMU DirectFB display driver
This should be all that is required, and should be faster than any alternatives.
Your other less efficient option is this setup,
slitaz core, or tiny core, X-less minimal only.
DirectFB driver for SDL
QEMU
This all assumes you forgo the X server, which I would if efficiency was most important. If ease of setup was most important, then you already know the more commonly traveled path.
This is the pay dirt of information, I would be shocked if you find a ready made solution for these exact requirements.