You won't necessarily lose all the data on your sd card if you partition it appropriately; I only have a 384MB swap partition on my 4GB class 6, with the rest as a fat32 partition. All depends how you partition it. There are a few guides floating around (http://wiki.maemo.org/Swap_on_microSD).

/etc/init.d/rcS is essentially the file that calls all of the actions that happen when you boot the device up - things like starting the hildon-desktop, activating partitions, setting environment variables, etc.

Swappiness is a variable that indicates how much the system will prefer physical RAM over using virtual RAM (swap space). The default setting in Maemo5 (up to and including PR 1.2) is 100, which means it nearly always preemptively swaps - even when not needed. Setting it to 50 (or even 30, when using the internal swap partition), will nudge that balance a bit - make the system use up physical RAM (which is significantly faster than swap space) before deciding to use swap... in a nutshell.

As for my config, I can upload and post it, and will write up a tutorial to help the process a bit... bear with me, I will reply to this thread when complete.