I had a phone that (almost) worked like this way back in 2010. It wasn't an Android phone though, Dell Venue Pro running Windows Phone 7. All the user-facing st

I had a phone that (almost) worked like this way back in 2010. It wasn't an Android phone though, Dell Venue Pro running Windows Phone 7. All the user-facing storage was in the form of an SD card but there was actually a smallish amount of onboard storage that was used to flash the OS image when you inserted a blank card. There was also some sort of device-specific encryption key preventing you from moving cards between phones without reformatting.