With the caveat of it not being a portable single file, I find custom image-based Linuxes fill this gap perfectly.

There's of course Fedora Silverblue / Fedora Bootc with https://universal-blue.org/ and https://blue-build.org/ being good examples.

Recent developments have seen the creation of bootc images for non-Fedora distros too, and at this point I've seen quite a few cool arch-bootc custom images, completely customized to the author's desires. See: https://github.com/bootcrew/, https://github.com/tartaria-dev/tartaria

I thought bootc had an open issue preventing it from working with Arch (or anything other than Fedora). Having working VMs is way further along than I expected anyone to be, this is really cool.