Well, to put it Apache terminology:
It works!
The -wic parameters did the trick. Thanks.
Let me spell out a little more about what I'm trying to do and get your advice. I'm open to different approaches.
I'm building a Web appliance that you run seconds after a download or popping in a USB drive, which will inevitably be shut-down by a lot of people by clicking on the close gadget. Yep, it's bad practice, but no, I won't be able to stop them. So naturally, I am drawn to the involatile fresh system every time reboot. I think that there will be considerable appeal to this VM due to the neat trick of the same VM booting on Linux, Windows or Mac desktop with no install or admin rights, and the service it will provide.
After the apps are initially installed on this VM, there does not really need to be persistence on the VM between reboots. By that I mean, the VM can reset to the initial state it was distributed in, with pre-installed apps. But there will be a lot of configuration originally, such as an app in Apache cgi-bin. Additionally, the contents of cgi-bin will be updated from a code revision control repository on every reboot. This COULD persist between VM boots if the advantage is great enough (cutting down bandwith usage), but I'm willing to live with it either way. It depends on what is of greater value: incorruptibility or cutting down bandwidth usage. It's not a very large app.
I'll also be installing a bunch of API libraries that will have to be updated time-to-time, and will face the same issues. But when that happens, I can just tell people to download the new VM, since it is so small.
Is this all making sense?
Also, I am not particularly married to the tce system, even though I understand it is one of the big advantages of this platform. But it seems that I may just want to use tce to get the gcc common build stuff, then do the installs that way in those cases where there's not an extension (like mod_python for Apache). Once the original hda1 is set up, I can always restore it from a backup file.
Thoughts? Advice from the gurus?