Free RAM is wasted RAM. Ideally you want 100% of RAM used (by applications/cache/buffers) and 0 swap usage. Swap is horribly slow and should be avoided at all costs (this sentence applies not just to N900, but all linux systems -- and this is why most Android devices don't use swap at all).

Unfortunately, N900 and Maemo5 as it runs on N900 simply can not function without swap. N900 really should have 512MB minimum to run smoothly, but that SoC configuration was not available to Nokia at the time N900 design was finalized, from what I've read.

Different kernels may affect RAM availability as a result of different compiled-in options or optimizations. On N900 virtually everything that is nonessential is compiled as a module, meaning it does not get loaded unless it actually gets used. Unused modules don't use any RAM.

There are recent discussions on LKML about optimizing swap for flash media, batching writes to align to erase-blocks, etc. which would greatly speed it up (similar, for example, to Btrfs in SSD mode). But this doesn't exist in our old kernel and may never exist for us if it's something that can't be backported easily.