Since you seem ok with NFS, you can get an even smaller runtime
footprint by moving stuff used only "in admin mode" to NFS. I have in
the past used flashybrid for that and (with a 2.4 kernel) succesfully
maintained a apt-get update-able system on 128MB USB sticks.
Code is here (essentials are the flashybrid lists in defaults.cfg):
http://source.jones.dk/?p=fleshybrid.git
git://source.jones.dk/fleshybrid