2 things:

#1- firmware .51 no longer seems to work with any amount of swap (I've tried 16,32 and 128M) - i get out of memory as soon as I enable some and do something.

#2 - you want swap on a independant partition on the MMC, so that if you plug in the 770 into a desktop computer and it makes the MMC card go into USB Memory card mode the swap will be ripped out from the 770....

See the entry on my blog:
http://www.dillernet.com/apple/2005/12/27/making-swap/

it has some good info on this.

I don't use swap anymore with .51, it may not need it anyway. .48 did.