Now when you say you are going to install lot's of applications that is not the same as using memory or swap. The installation is what you'd put in your 812MB of space. To give you a perspective the largest app that I have installed so far is 2,408,576 while rsync is the smallest at 241,548. If you run xterm, then it will consume 2.4MB of memory. I think you'd have more than enough for both areas, if you use the 128/812 configuration.
I recommend you move the root and user home directories onto the memory card (/root and /home/user) as well as user data like bookmarks (/usr/share/osso-bookmarks), settings (/etc/bluetooth/name, /var/lib/gconf, and /etc/osso-af-init/locale), even installed programs (/var/lib/install).