Most probably do since /system/bin is in the PATH by default. At least this will get you root directly on the phone without having to use adb shell. Having said that, it's probably best to leave /sdcard vfat (since having full blown UNIX style permissions on /sdcard breaks some things) and creating two separate partitions on the SD card. Make the second one ext3, mount it wherever (/media or some such, doesn't really matter), and start loading it up with ARM/Android compiled binaries. It should be rather trivial to get the base Debian image running at that point like the G1 had not too late into its rooting.
Past all that though, the real thing to start messing with at this point would be iptables, IP forwarding, and the wireless card for tethering via WiFi. And it would be nice how to figure out replacing the base system of course with 1.6 or 2.0. But I'll leave that to more adventurous folks than myself. I'm just happy to have a fully busybox installed in /system/bin with a bunch of symlinks for the time being.
