I would like to create a custom USB GNU\Linux Live distro. My requirements are:
- Customize the included software myself. Even build it from a very base system. I want a desktop in my pocket including firefox, thunderbird, libreoffice, some multimeda like mplayer, and a basic WM like blackbox or i3.

- Fit into a 2 GB stick. That leads me, as I understand it, to a live USB to take advantage of the compressed image. A "normal" usb install may not fit, may be very slow.

- Have some spare space in case I want to save something. So I guess home will be on a seperate rw partition. If this is not doable, I have some dropbox space, so it's not that bad.

- Have some way of keeping the system up-to-date. Even if this means that I have to update the system on my PC and then re-flash the image on the stick.

- Being able to run on 1GB RAM. If there is any space left on the drive, I may make some tiny swap (128MB, 256MB ?) just in case...

Is there some way of customizing a distro, or building one from base, to accomplish this?
Any starting points, guidance, info, comments much appreciated.

i do this with fedora live-usb (with persistent overlay so i can save documents and install stuff). i dont think you can update the os without creating a new live-usb.

From the screenshots I think this is similar to unetbootin, meaning it creates a live usb from an existing iso. I would like to tweak the system BEFORE I make it an iso/live usb. What I am currently thinking is install and tweak a system on a vm, probably slackware or debian, and then somehow make an iso of that vm installation. For the persistence thing, I am mainly interrested on files, so a seperate home partition would do the trick.
Sounds like a plan, right?