I am willing to test this thing you mention.
One possible fix is to manualy specify what "modules" to load at your vmlinuz grub line, this will make the copy to ram option only copy the squahfs files to ram, not the entire partition.
But I don't know how one do such specification on the boot code.
Here is a problem for me. I already have Semplice booting which also want the live directory to be placed on its own in the /mnt/home/
and Pussy being debian also want to have it's live there so them collide having same name.
If I rename you pussy live directory to pussylive should I them rename it in menu.lst also but should it have say
title Pussy live
find --set-root --ignore-floppies --ignore-cd /pussy.iso
kernel /pussylive/vmlinuz boot=pussylive noautologin quickreboot noprompt toram
initrd /pussylive/initrd.img
or
title Pussy live
find --set-root --ignore-floppies --ignore-cd /pussy.iso
kernel /pussylive/vmlinuz
boot=live noautologin quickreboot noprompt toram
initrd /pussylive/initrd.img
title semplice_2.0beta1_140.1.iso username=user hostname=SempliceLive locale=sv_SE.UTF-8 keyb=se timezone=Europe/Berlin klayout=se kvariant=nodeadkeys noprompt quiet splash
find --set-root --ignore-floppies --ignore-cd /semplice_2.0beta1_140.1.iso
kernel /live/vmlinuz boot=live noprompt noautologin username=user hostname=SempliceLive
initrd /live/initrd.img
title LMDE-11 Gnome Linux Mint Debian Edition 2011 Persistent does not work.
find --set-root --ignore-floppies --ignore-cd /linuxmint-11-gnome-dvd-32bit.iso
kernel /LMDE-11/casper/vmlinuz rw file=/cdrom/preseed/mint.seed boot=casper iso-scan/filename=/linuxmint-11-gnome-dvd-32bit.iso noeject noprompt quiet splash --
initrd /LMDE-11/casper/initrd.lz