I just installed a CF to IDE adapter in my laptop (333mhz/160mb ram/2GB CF) and I want to have a "frugal" system like in DSL or Puppy. (the frugal install puts the whole system into ram on boot, then makes the CF drive read-only, to lengthen it's lifespan) But I want it to be my own custom install, like some a debian-based install from scratch.

I've done something similar before with Ubuntu (command line install, then apt-getting what I wanted), but that result turned out too big, and well, it wasn't a frugal install.

I only want to have the programs I want (less than 20Mb total), X, and the base system. I'm not sure where to get started, or how to make it frugal once I'm done.

Have you checked some of the existing "frugal" distros?
Some of them have instructions on how to do your own version of their distro.
Check their respective web sites.

By the way what is a CF to IDE adapter?
Are we talking a USB to IDE adapter?

A CF to IDE adapter allows you to use a compact flash card as a HDD natively, connecting straight into an IDE cable. The computer doesn't know the difference.