I've got a Class-10 4GB SDHC card, which should hold enough to boot to a GNOME desktop. Write performance is likely to be abysmal, but we'll see.
Please update with your results. I've seen there's a fork of Ubuntu called EasyPeasy specifically targeted for low power consumption. It might be worth my while taking a look at that.
I'm pretty sure I'd seen a Debian fork of some sort recently that minimized or eliminated disk writing (to the boot drive) as well.