can i setup 2 distros and run at the same time?

Sure! With 2 Linode's. ;-)

Any other solution would be some form of system virtualization on top of Linode's virtualization which A) probably isn't possible, and B) is not a good idea anyway.

You can have 2 distros set up, but they can't run concurrently.

You can compile a UML kernel to run under UML, but you'd need a second IP address to do anything with it (unless you want to fool around with NAT), and I would imagine there'd be a huge performance hit.

Is it possible to run a UML instance under UML?

@jhmartin:

Is it possible to run a UML instance under UML?

Yes - but with a huge loss of performance. If you divide a UML instance into n sub-UML-instances, they not only have to share already-shared memory and processor power, they have to contend with one another for access to the UML I/O system, which then has to contend with other UML instances for access to the physical I/O system.

My guess: the load goes through the roof as processes block on disk activity.