Is it possible to write system level source code in Vala. like for a small Micro kernel OS? or for use it in the Linux kernel for modules or device drivers?
Technically, yes, but in reality it's probably not very practical.
People have written kernel modules in Vala before, but AFAIK nothing really serious. Actually, someone wrote a Multiboot kernel using Vala a few years ago.
You can get around the dependency on GLib by using the posix profile (pass --profile posix), but it tends to be a bit buggy and lots of features aren't supported, including a lot of the stuff that makes programming in Vala a pleasant experience.