I thought that the plug has 512mb flash AND 512mb DDR2 memory.
Is it not possible to run any volatile data in the ddr2 and run read only stuff out of the flash?
I am very interested in doing exactly the same as you. At the moment I have FreeNAS server running on a mini-itx m/b and 4 x 3.5 Raided sata drives. I only power it on when I need to move files or run my squeezebox. Raid is an overkill, but it was an technical exercise. I think two drives and a chron timed incremental backup every day would suffice!
I have my own domain, hosted on Webmania, with our mail on it. I would like to bring that in house, and have an "always on" server running a mail server and one "green" drive, the new Samsung green sata drives only take about 3-5 watts, or even a USB stick, they are cheap enough to throw away when they wear out.
An even better device would have been the new OpenRD-Base, or client modules, www.einfochips.com/marvell/
they have two sata ports and the client has two ethernet ports also. I have mailed einfochips to try to buy one of these but they are proving very coy, and the plug is a lot cheaper!