I think partly there may be some confusion in the UI.  The slider
doesn't really make it clear that in involves a tradeoff of space
allocation between the system boot files, and the installation.  So
maybe it could use something that turns red or shows a warning if you
drag above some threshold (90% or 800M or whatever).

With a 1G usb stick, it might make sense to advise the user that they
will not be able to install kernel drivers due to space limitations.

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https://bugs.launchpad.net/bugs/562312

Title:
  initramfs-tools failed to install/upgrade, due to all space on usb key 
reserved for persistent storage.  No space left to write initrd or vmlinuz.

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