Thanks to kernel mode-setting and other improvements to the X.Org Server, we are basically there, but it's something that has been said for over a year. Moblin though has been running the X.Org Server as a user since their Moblin 2.0 release and now with the MeeGo operating system while others are now looking to get in on the root-free action.
Canonical hoped to not run the X.Org Server as root with their forthcoming Ubuntu 10.10 release, but they didn't make that goal. Though the Ubuntu developers are just about there so it should be a candidate for Ubuntu 11.04.
As talked about at the X.Org Developers' Summit in Toulouse, one of the last development changes to overcome is how to handle input devices when you have multiple X.Org Servers not running as the root user so as to know which input to direct to the appropriate X.Org Server. For those more interested in this topic, below you can see/hear our compressed recordings from this XDS talk. There aren't any slides or other visuals really expressed so the audio feed is more important than anything else.
Due to YouTube limitations, the video is available in three parts.