Hi Doug,
The script grml2hd creates a standard Debian system. It does not work like live CD. To add or remove packages, simply run apt-get.
The grml2hd script already generates initrd files and configures LILO. Click "yes" when prompted. You can modify later, but nothing requires that.
A different script called grml2usb creates a device which does imitate grml live CD. It is meant for smaller capacity devices like flash sticks. Your ideas are relevant to those. The grml team has mentioned plans for the things you suggest. But if you use grml2hd then you don't need them.
Note to Mika: could rename "grml2usb" as "grml2flash" to avoid confusion between these scripts. Both of them work on USB devices, but one is meant for hard drives, the other for flash sticks.
M