first up credit to Z for recovery and providing PoC of dualboot images.
I have worked on base image provided by Z and have removed most of the crap or not so necessary stuff keeping following thing in mind.
1) if we want to use 2.1 that's coz of its camera...
2) we need a basic features to be working on Phone.
I am right now testing this slipstreamed bare bone ROM will upload by tomorrow.
you can expect following from this tread
1) Collection of system.ext2 which you can use for various ROM.
2) Basic guide on how we achieved this size reduction.
3) Instructions + scripts on how to do the same in xrec .0.3 also.