Similar but with a 16mb usb drive for my settings and apps.
Ran pretty well since I only used an msn clone, web browser, occasional types assignment and some Winamp clone. Had an an external hdd for my media do it covered everything and just worked.
I quickly learned to symlink certain things (usually the least-updated ones) to folders in $HOME, and put together some bash scripting to copy stuff back and forth. By the time I had a replacement disk I was already somewhat fluent.
And yeah, hardly ever had to reboot, only when doing radical changes in setup. I remember I was using windowmaker instead of the default KDE 3 after a while, although I don't quite remember the thought process that led me to it.