Mozilla Labs last week released a new version of Prism, a single-site browser system that brings web applications to the desktop. The latest version is designed to work as a Firefox extension rather than as a separate XUL application.
Roughly, you can run server side code offline. The interesting part is the lightweight browser. It does not support java (I think), but who knows?
Edit: after more careful reading on my part, it is more like a packager, no server side code locally, but the offline-lightweight stands.