I wasn't able to find much information on why this was happening. Running VirtualBox from the command line didn't give me any errors. I turned off Compiz/Beryl. I re-installed using Emerge, removed my .VirtualBox folder, re-installed again using Equo.
In the end, as I was about to give up and post my problem here I thought I would try using VBoxManage.
voila! I just picked any command. i.e VBoxManage createvms -name 'Fedora 10' -register followed by VBoxManage startvm "Fedora 10" -type gui and I get the registration dialog, followed by the guest powering up.
After doing this, running VirtualBox from the applications panel or command line has no problems. I'm not sure whether anyone else is having this problem but since I had a fairly clean install I thought people may be and posting this would help. I was about to do a whole re-install and this time forget about the world update. So if I help at least one person avoid doing that my task is done
My system,
Intel e7400, Nvidia Graphics Card (using nvidia driver version 180.44)
Sabayon 4.1 64bit (kernel 2.6.29-sabayon)
Gnome-2.24.3 (world update using equo)
VirtualBox 2.2.0 (installed thru Spritz)