For the refresh error, as technut said there's a log there. You can ignore the warnings in the log, but if there's an error you should (possibly just temporarily) look for and disable that repository (click 'details' in the list of repostories to get access to a tick box for disabling it).

The 256MB internal flash of the N800 (and N810) is the internal 'hard disk', or storage. It's set up as a compressed file system, so it actually stores much more than 256MB. The operating system itself is on this flash storage, as well as your own files. The SD cards are mounted (=made available) in such a way that the 'execution' flag is not set, this means that applications can't be installed on the card(s) and expected to run. With the exception of scripts, which can be made to run with a slight trick.
However, it's possible to change the mounting so that the 'exec' flag isn't disabled for one or both cards, it's been discussed in the past and you can probably find it in some thread. (It may be as easy as editing /etc/fstab, but I'm not certain - didn't try that myself. For any ordinary Linux system that _would_ be sufficient.)