Even the root filesystem can be FUSE if you want it to. The only thing that needs to be in the kernel is the initial root filesystem driver. Nowadays that is pretty much always just compressed CPIO (initrd). At that point user space can do pretty much whatever before doing a pivot_root operation to wherever.
It's not really initrd though; the kernel uses initramfs, which is more like tmpfs (emulating a filesystem in the VFS cache) than a ramdisk (a preallocated piece of memory that emulates a block device).
The files are still loaded from a compressed cpio archive though, and because of the initrd legacy that file is still called initrd in most distributions.
