Installing Distro's To A Virtual Image On SDHC Card
 

I have an Eee 1000 with Xandros installed on the SSD. I have experimented with Debian Lenny and Fedora 10 installed to separate partitions on a 16GB SDHC but now I want to try something a little different.

Partitioning the SDHC and creating Linux partitions renders the card unreadable by Vista so I can not use the spare space to store files. Originally I installed Debian and set aside a 6GB FAT32 partition for storing files.

What I'd like to do now is to be able to install *DISTRONAME* to a file/ virtual disk on the card which has a single FAT32 partition. I know a little about Wubi and Ubuntu but I don't have Windows on the laptop so that's no good. Fedora has the liveusb-creator but this seems to replicate a live CD with persistent storage as an option. This means updates wouldn't work or would use the persistent storage, retaining a copy of the original files but hiding them behind an overlay.

Having used CoLinux, Qemu etc. on a Windows machine I understand that I could do a normal installation and then use partimage or dd to create the virtual disk image but how would I then go about setting up GRUB and the kernel boot options?