Been fiddling alot today and I found out some things, patients is a virtue. After flashing the drive to a few other things I returned to this project with a new idea. I would see if the kernel was the issue. Tested and failled to get altboot working with Angstroms new 2.6.23 kernel so I went back to pokylinux's.
This time instead of flashing Angstrom then backing down to the 2.6.21 kernel from pokylinux, I just flashed pokylinux onto the machine. Side note - pokylinux is very palm like as far as its gui is concerned. A terminal, file manager and other basics of a pda are there. File manager helps with moving things around abit. Anyhows, installed altboot and went from there.
Prep the SD the same way as chero said etc ...
Rebooted into debian, depmod -a at the prompt and rebooted again. Everything loaded fine. Manually setup and launched the wifi card, download titchy full (apt-get install titchy), after I did an apt-get update. Let everything install, and with a moment of hesitation ... typed startx and enter.
Drum roll ... it lauched the gui right off, all of it ... first the VERY welcome to see touch screen calibration screen and then onto the gui itself. Nice. Btw it resumes and suspends without any configuration at all -sweet-.
Now to tweak with it.
So the Openhand (pokylinux) kernel works perfectly.
For those of you who might try pokylinux, its load screen and such looks alot like angstroms.
Pokylinux does have full pim (pimilco apps), web browser, media (movie) player, notepad, filemanager, some cheap games, terminal, and some other extras. Not bad for a basic gui.