This is actually a neat idea I might try myself, because this might give some second life to the 770 when the battery starts to wear out. I currently use a linksys nslu2 with debianslug firmware for this, and my old 770 would actually be a nice upgrade in comparison. If you enable the usb hostmode, and get the proper equipment (self powered hub, and y cable with gender changer to feed power back to the usb port) you can attach usb harddrives and ethernet adapters easily. With initfs you can boot directly from a usb harddrive, bypassing flash entirely.

I wonder if there is a way to get debian/armel to install and boot...