So there have been a few people on the forums wanting to run the Raspberry Pi off a small SD Card with a USB Storage device as the main OS device. You can actually run a Raspberry Pi off an SD card as small as 16 megabytes. Since you only need a few files on the SD Card to boot up the SD Card.
The files required are –
After you put those files onto the SD Card, you need to modify the cmdline.txt file’s root parameter to point to the usb device. Normally it’s pointing to the 2nd partition on the SD card which comes up as /dev/mmcblk0p2. This needs to be changed to /dev/sda1, assuming that the OS is installed on the USB device’s 1st partition.
This will allow you to run the Raspberry Pi off a very small SD Card if neccesary, or just have the OS on a USB storage device.