I just built 2.6.0-test2 in 441kB with one IDE DMA driver and ext3. I have yet to try LinuxBIOS (waiting for some BIOS Saviors!), but it looks like I will be able to do quite a lot with my Tyan Tiger MPX (S2466N-4M) if I upgrade the BIOS chip to an 8mbit part.
Doing anything useful with the 4mbit chip may still be a lost cause, but it does look like 2.6.0 has lost some bloat. Perhaps if some of us contribute more "embedded fat-trimming" patches we can make linuxbios+linux+initrd fit easily in a half megabyte.
Jeff