I've been experimenting with aufs, unionfs and mini_fo for a while to mount ext3 partition on top of internal memory. All of them have problems.
One common problem was that both of the file system partitions needed to be writable. It is because of the complex algorithm when renaming non empty folder from read only file system (aufs page has a good explanation on that). For example application managed did not work because of this problem. So mini_fo did not work at all.
Aufs is most flexible in configuration. But for some reason with it phone stopped playing video. And the battery did not last long with it (~6-8 hours). And I could not get the file system to umount during shutdown so I had a lot of lost data and sometimes after shutdown phone was unusable.
Unionfs was more stable. I did not have the problems aufs had. But it was impossible to set priorities on where to write new files if there are two writable file systems. Everything was written in root file system as it already contained folders where the files were written. Unionfs has awful documentation. It was not easy to find that it was the default behavior for new files. And I could not find how to change that. So very quickly I ended up with 0 bytes left in root file system.

Right now I moved everything to the card and change the root file system to the card during boot. But I had to enable R&D mode and disable watchdog for it to work. While I was experimenting watchdog was only casing trouble. Right now I am searching for a way to remove it from the system.
With disabled watchdog system boots fine from card and everything works fast. When I moved only /usr to the card without disabling watchdog the system was slow and unusable. And it was impossible to move the whole root to the card with it enabled.
I can upload my modified firmware if someone wants to test it. It will write root file system image to the internal mmc card at the first boot and after that it will be booting from the card.