endso, why are you trying to build a "live" image? and why do you want it to fit on a usb/portable device?

I would be more than happy if I just had the dev tools (Scratch DSK, Qt-SDK, for N900 for sure and maybe other devices too) on a random linux distro of choice (for me personally Debian, but maybe (L/X)Ubuntu is more accessible) inside a VirtualBox image, regardless of whether it is "live", and regardless of size.

Just saying, maybe your ambitions are a bit high? Obviously and needless to say, I fully appreciate all your efforts and hard work none the less