But I have to disagree.
There is a script on Louigi600's site to copy the entire root to SD. I used it (modified it a bit) to copy the entire root to the first partition of the microdrive. It was a simple modification : replace /mnt/card by /mnt/ide.
"uboot" that comes with pdaXrom has options to boot from
- flash (when you don't hold a key)
- emergency (holding "OK")
- SD (holding "1" ?)
- Microdrive (holding "2" ?)
- CF (holding "3" ?)
I'm not sure about "1", "2", "3" and "4" and the drive they are linked to. In my case I have to hold "2" to boot from microdrive. More info on this can be found on Louigi600's site.
So now I can boot from flash (holding no key) or boot from microdrive (holding "2").
My first partition of the microdrive is 2Gb, so I don't have to worry about disk space and I don't have to install apps to external media.
I've been running it like this for about 3 months now without troubles.