The update shouldn't have used any more space. You should have 50-70 meg free (depending on installed apps) just like before.

rootfs is actually on a different piece of hardware than the rest of the device. 256MB of NAND Flash. So you can't repartition it away.

On the N900, there is something called "optification" going on to make that partition plenty big enough for all of the applications you want. Any files that would go on rootfs get put onto the flash drive and a simlink gets put in its place.

Hopefully that makes sense.

-Will

edit: looks like I was beaten to the punch.