The onboard flash is a very limited resource, so much so that, as Mark Lord has been adding features to his Hijack kernel, he's been carefully budgeting which bits of Flash are used for storing settings. So yeah, you need an HDD on the 'peg for your dev work.

Unless you intend to completely replace the kernel on the 'peg with your own kernel, in which case, yes, you need to use the flash for the kernel.

The basic division of labor is: Flash=Kernel, some flash-based kernel settings. HDD=Swap, temp storage, and usermode apps. I'm sure there are exceptions to all of the above but that's about it.

For other dev resources, there's a few bits here.