I fixed my first problem by re-formating the VFAT partition to FAT32 in Windows. I now have 3.05GB of space to use.

After removing the .swap file, I still have the same problem outlined in 2) above. Once the USB cable is plugged in I lose access to the internal memory card. Since the removable card can not be accessed by USB it is kind of a pain to have to remove the internal memory card to put data on it.

Is this normal when booting from mmc?

Thanks...