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The real big problem in my opinion is that, when you start with a small linux distro, you need to add a large amount of library for the fornt-end software (gps navigation, media play, ecc...).
If you want to save up space you can try to build a small distro with gentoo and uClibc instead off glibc.
I do it several time, but unfortunately every time many package have problem to build with uClibc.
For my carpc I'm using gentoo linux with glibc. The main reason is that with gentoo you can choose which package use, and not install unwanted package. Many distros force you to install useless dependecies.
I boot the OS from 4 8GB USB dongle in RAID5, it's not fast as a SDD but is cheaper and is not affected to the chock as the normal hard drive.
The next step is to load the whole os into ram using squashfs to increase the interaction speed (usb I/O perform not so good), and use the USB key only for media.
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