just to add on this...this space fills gradually with app's data and cache, while apk's go on your 1024 ext2 partition. so, you can go out of space pretty quickly if you install lots of apps (or install large apps like games). but you can slowly lose space without installing anything (app's cache piles up with time) - correct me if i'm wrong. in that case just go into titanium backup->batch tools->clear cache for user and system apps. for me it usually frees 20 - 30 MB of space.