Not that we shouldn't, just playing el abogado del Diablo:

Why should we, since we're not trying to do any of:
a) burn it on a business-card CD-R
b) run it from a 64MB USB drive
c) install it on archaic hardware with less than 128 MB disk

As I understand it, debian is very modular, so even if you had a 120 MB image that you could flash an N800 with, you could promptly tear into it, removing all packages you don't need, and get to a clean, working, much smaller system in minutes. You could argue that it should come full, because removing packages is easier (does not require a network connection) than installing them.

My real opinion is that the image should have everything you need to get by comfortably until you find a network connection to install more stuff from. Not totally barebones, because there's no hard space requirement, but not bloated either...

I'm assuming that such an image can be gotten under 128 MB to reflash the system with debian (no MMC req'd) at some point. Though I'd rather not take advantage of such capability, at least not till I get a backup tablet...