Now, if I understand you correctly, what you're looking for is basically a small Linux distro which includes Hercules which has its own small Linux distro bundled with it? That's an interesting idea.
About a year ago Richard Higson was working on something similar. The idea was to have several distributions to pick & choose from and they would all fit on a cd sized iso image. But I haven't heard from him in a long while. I believe he was encountering some problems fitting them all on a cd. Since /usr/share is so large I suggested that he just have one for all distributions.
Greg
