without compression would it even fit on the flash device?

I see no reason to even bother, if I was worried about needing more space, I would not have moved in off flash in the first place. I moved onto flash for backup/recovery/portability/speed. booting to flash will allow you to remove packages from mmc OS easily. install a package thats bad (system wont boot), boot to flash and remove it. edit a file and mess up the boot process, boot to flash and fix it, these are GREAT advantages over default OS distribution.

I personally think they should put a minimal OS in flash (with install/recovery/remote backup/) and use itself to download, upgrade and push OS onto a MMC/SD card. But I guess I am just dreaming...

Seriously though, HOW MANY REPAIRS WOULD THIS SAVE NOKIA!!!!! Does it work in flash, well then run diagnostics or restore remote backup.