Unfortunately, the documentation is quite bad for the portable ubuntu... you have fun looking into that.

And yes, there is about 500-600 mb of free space in the image. I filled it with 0's to save space when compressing, but yes, it is [theoretically] possible to make a smaller image.
A small comment though: it is quite easy to make a certain image larger (add free space to it), but I am trying to figure a way to make it smaller without loosing any content (so it can fit in a FAT32 USB key).

BTW, if you have Vista (please don't take this as an offense), can you tell if it works as well?



Thanks