It is indeed a pretty crappy limitation (256MB), but there are things you can do to have room for as many applications as you want, namely moving things out of rootfs. There are scripts which can do this for you.

See: http://wiki.maemo.org/Free_up_rootfs_space

Download and run this script, as it safely frees up rootfs space and shows how much it has freed: http://wiki.maemo.org/User:Tanner#Sa...pace_on_rootfs