> You CAN create a Linux distro without an MMU [...].
> [...] the kernel itself can be ported, its been done.

Indeed, see μClinux.

> early X86 [...] can't support anything much more complicated than CP/M or DOS.

Xenix does run on 8086 and 80286. After the 8086 port, it took one more year to port it to the 68000 (and 80286).
Further "UNIX (or UNIX-like) OS'" which do/did run on 8086 and 80286 are:
- QNX
- MINIX
- Venix
- PC/IX
- Idris
- Coherent
- ELKS
Besides, also OS/2 was originally created for the 80286.