If your virtual machine has IP connectivity, mount its root filesystem over NFS. (You'll need to have the NFS client driver and its dependencies in the kernel or initrd/initramfs.)
On the host, install an NFS server and export the directory by declaring it in
On the guest, read
nfsroot.txt in the kernel documentation; in a nutshell, the kernel command line should contain something like
If sharing the directory tree during the VM's run time isn't an absolute requirement, and all you're after is conveniently regenerating your root filesystem before booting the VM, then it would be simple enough to write a small script or makefile that rebuilds the root filesystem image before booting. This is pretty common in embedded development. A convenient choice of root filesystem is initramfs, a variant of initrd. See also
How to generate initramfs image with busybox links?.