Let me weigh in on this issue since I think that Helander makes a very good point, and my experience may show the potential confusion caused by having both a persistent home and an automatic backup. This confusion is apt to be typical of someone using Tiny Core for the first time.
I own an Eee 900 with Xandros living on the SSD drive(s). I decided to boot Tiny Core from an 8 GB SDHC card on which I had created four partitions of varying size. After a number of trial runs with TC on a 1 GB USB stick, I decided to put it on a 270 MB ext2 partition on the SDHC drive. I used the boot codes for a persistent home= and tce= on that drive.
In most respects that setup worked admirably--except for one problem. If I allowed backup on shutdown, I found that my backup file (mydata.gz) grew in size quite rapidly, even if I had made no changes to my system. Even worse, I quickly found myself getting file system errors on the ext2 partition, so I kept having to run e2fsck to remove them. I scratched my head and dug into the mydata.gz file to see what was causing its growth. The problem was related to Opera's /.opera directory, but the solution was NOT to add that directory to /opt/.xfiletool.lst. It's true that when I did that I could eliminate file system errors and the uninhibited growth of mydata.gz, but I also lost a lot of functionality in Opera, particularly its ability to remember what web page I was last browsing and where I was on that web page. (That ability is crucial if one wishes to use Tiny Core with Opera as an ebook reader!)
Eventually, I determined that my best solution is to have a persistent home on an ext3 partition (since it will be written to often), keep my *.tce and *.tcz files in /tce and /opt directories on the ext2 partition, and change the .profile file (in the /home directory) so that "export BACKUP=0".
I believe the setup would work fine with everything on a single ext3 partition, as long as "export BACKUP=0", but without that change, the growth in mydata.gz (caused by Opera) can be quite alarming. By the way, it wasn't enough to just add more lines to /opt/.xfiletool.lst. I added "home/tc/.opera/opcache", "home/tc/.opera/cache4"
"home/tc/.opera/usagereport", and "home/tc/.opera/images" and still didn't solve the problem--nor did I put an end to file system errors until I switched off the automatic backup.
Very likely, I did something boneheaded. My point is that perhaps one should recommend either persistent home and tce, or automatic backup . . . but not both.