Just ran across this while looking at the latest in free Java VMs:
The Alta Virtual Machine is a Java-compatible Virtual Machine designed to provide nested process services to Java applications. Alta is based on Kaffe.
Alta: <http://www.cs.utah.edu/projects/flux/java/alta/index.html> Flux/Fluke: <http://www.cs.utah.edu/projects/flux/fluke/html/>
Looks like somewhat interesting work on OS security and resource management, capabilities-like, although in my (admittedly brief) perusal I didn't see the actual word "capability".