Novell created and put up something called SUSE Studio, a web site dedicated to helping you create your own Novell SUSE-based Linux distribution. SUSE Studio is extensively documented over at the OpenSUSE wiki.
SUSE studio takes you through all the possibilities, and allows you to extensively customize the resulting distribution, including wallpaper, scripts, software, and more.
You can choose what form (or forms) the ending result takes: a VMware image, a Xen virtual image, a Live CD/DVD, and others. You can even run the image live over the web using a Flash-based console or VNC.
Over at ComputerWorld, they reviewed the updated SUSE Studio extensively; I plan to give it a try in the upcoming weeks. Should be interesting.
UNIX Administratosphere 
Nice post. I also post about opensue at http://www.the-server-admin.com.
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I thought I’d give you a chance, so I left your comment as is.
suse studio is say running build and it has been now for over a few hours but nothing is happening and there is no test drive button. how long is this thing supposed to take?? im making a very small os.
Last time I tried it, it didn’t take that long at all; maybe a few minutes tops. It’s been a while since I was on there.