Hi.

I really think building a special .upgrade file to create and initialize hda2 is a better solution. Probably along with a modified kernel to boot from that partition. An alternative to a modified kernel is a modification of /dev/hda4(? the player partition), either by us, or by the empeg team. That modification check if hda2 is formated, and if so, mounts it (to /opt for example) and starts a specific program there (e.g. /opt/bin/init).
However, I am still looking at the first variant (a modified kernel plus hda2 as the new root partition). This requires reimplementation of the empeg supplied init program though, if my findings are correct.
I would then supply a kernel (alternatively as a .upgrade file that only updates the kernel) and a hda2 initializer. The way I would implement that environment, it would create a (e.g.) 64MB file on hda5, if it isn't already existing and mounts it as a loop back device. After that, hda2 could be updated with newer versions of the base environment (by means of a .upgrade file) without replacing user installed programs (which are installed in the loop back'ed filesystem). After updates of the empeg supplied software (which usually replaces the kernel), only the kernel needs to be re-installed.
This isn't really well thought out yet, but I don't have much time these days to look into hobby projects like this.

cu,
sven