Does it have to be Damn Small Linux?
Reason I ask is I mentioned in another thread about CPX-Mini which is a debian based live iso for usb thumbdrives....it uses fluxbox unionfs and persistant home directory as well as grub.
Theres also the very similar benix which is somewhat the same but uses xfce.
Both are kanotix debian based on sid.
http://www.informatik.hu-berlin.de/~bading/cpx-mini/
http://debian.tu-bs.de/project/benix/
I just installed CPX-Mini and it rocks.
The install went flawlessly with the included script.
enjoy