@az_ua, sorry, but last month I tested rc2, and there was the same mouse issues, now again, I was suggested as you said, but no solution, it is somewhere in your forum.
I gave rc3 a try only for curiosity, didn't really expect anything more that that, I understood well enough how things going here, so no prob thanks anyway ;)
About xxxterm (alias xombrero), here our hint, in case you interested: yes, it is the smallest webbrowser existing deb precompiled in the ubuntu repos, but indeed the less user friendly... for that reason we had to switch to opera repo, they give precompiled deb opera12 there, which is only 12 MB, smaller than xxxterm and much better! :)
About squashfs, yes you right, you cant umount the fs where are the squashfs... but thats ok, because that same fs provides the space for the persistence ;) in our opinion its a very small price to pay to have all your memory dedicated only to your running programs (and not by static useless files!)
@trixar, about iso,of course there is no iso! :)) what we did so far, you could call it a dcore fork from which we kicked away tinycore without mercy! hehe :))
Ok, by now we structured it focusing only on old pc specs=slow cpu+small memory+live ...so no install,no swap, and persistence on whatever media you can mount ;)
It is made of the following files: original kernel file from lubuntu (utopic iso), 2 matrioska rootfs, one containing a smaller subset of lubuntu modules,and the other containing the dcore init scripts modded by us ;) all booted simply by syslinux from a fat32 usb key... then follow the squashfs files, 1 for every app.
How we did it... ahh, thats a whole other story.. ;)