If you install programs as root, then they will be able to do anything. Even if you encrypt the home folder of your account, a program installed as root can do any keylogging it likes and will be able to see the decrypted files when you are using this user's account. The best solution would be to have an entirely separate computer dedicated to bitcoin on which you install only the basic software you need to run bitcoin, downloaded from trusted sources.
To protect against trojans which are not too sophisticated, running a VM seems like a reasonable solution. If the VM storage file is encrypted, that's even better. See truecrypt for that.