I think the main problem with FAT is that you can't make symbolyc link.
Here is a thing you can do, this is a diy solution and requires some hand works :
- install the applications on the internal flash
- move some files (not symbolic links ;-)) to the sd card. (you can use ls -l and symbolic links will be marked with a l at the begining of the line
- use ln -s /mnt/card/myfyle /original/path (you can consider ln -s is working like cp and link entire directory)
This is perhaps not the greatest solution, but this way you can transfer some kb to your sd.
(I still don't understand the problem with the 50mb root partition, except
that you must be a bit more careful, if you have a 50 mb partition, just install to /home/user or /mnt/user and apps will go in the other partition