I just went through this exercise with Knoppix. Using the detailed instructions about remastering on the Knoppix site it was dead easy. The hard part was figuring out what packages I could do without.
I then put it on a USB fob along with grub. That was really slick. It booted quickly (relatively) and brought up the network on all my test boxen. I could burn CDs (hard to do w/a live CD in the drive). Makes a great recovery/rescue tool.
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