Linux From Scratch (LFS) is a project that provides you with step-by-step instructions for building your own customized Linux system entirely from source.
The LFS LiveCD is geared specifically toward providing a reliable host system for the purpose of building Linux From Scratch. Therefore, it may not be what you would envision as a "perfect" Linux system. It should, however, provide you with a comfortable enough environment so that you can, in turn, build your own "perfect" system.
Documentation for this project is extremely useful, and it is also a great way a person to learn how Linux works from the ground up.
More information about LFS LiveCD is here.
LFS project information is available here.