Android system-level development can be done on either Linux or OSX. For the past few years I've been using OSX, but recently I've switched over to using Linux.
Why? Mostly for the higher performance. The full Android system build takes about 30% less time under Ubuntu 8.04 LTS than it does on OSX 10.5 on the same hardware. Not to mention that it's much cheaper to buy a generic PC workstation than the equivalent Mac Pro.
I have had some early troubles:
It took me a while to get used to typing the "Ctrl" key instead of the "Command" key, and the ugly Linux fonts bothered me for a few days.
But since I'm mostly using the exact same programs on Linux as I was on OSX (FireFox, Eclipse, Android), after a few days everything clicked, and I think that I'm just as productive as I was before. And the faster builds and file system stuff (like grep) are wonderful.
It helped a lot to install the Blubuntu theme and some nice wallpaper to get away from the awful Ubuntu brown/orange color scheme.
Oh, and I'm using Chromium for Linux, which works pretty well, except that it doesn't support Flash. I still fire up Firefox occasionally to watch Flash videos.