That's a strange approach to virtualization. Trying to blend the Android and host kernels into one that has the features that Android needs, but still provides the isolation the host needs, sounds tricky, and prone to bugs and security problems. If done right, hardware-level virtualization (ie KVM) should have only minor performance implications, especially on a platform where things like network and file I/O are already quite slow and shouldn't be affected by a small CPU overhead.
Power management seems like a minor concern. Cars have orders of magnitude more energy available -- a typical car battery holds something like 500 W-h, whereas the Nexus One battery is about 5 W-h. Your overhead dome lamp draws more power than your phone.
Is the assumption that all car IVI systems will have some form of always-on network connection? Android certainly doesn't seem designed for an offline use case. I don't know how things like a store would even work in that case, and many applications and games are supported by ads.