It's amazing what sort of shrinkage - both in size and price - you can miss if you're not buying in a particular market. Yesterday, out for lunch with some friends, one of them showed off his latest toy, a 2GB USB drive. Which, as you can see even in these amateurish photos, is similar in size to an SD card:

Verbatim USB disk

Verbatim USB disk (front)

It's called the Tuff 'n' Tiny, apparently, and if you live in the UK, Ryman are selling the 2GB version online for £5.99 and two for a tenner on the high street.

I can also confirm that mine has partitioned quite happily into two FAT32 partitions, and, with prodding, boots Linux off one of them [the second. I had to use usb-creator, followed by install-mbr to get the bootloader to work]. I don't think I'll be following John's suggestion of RAIDing two together just yet, but who knows...