As interesting as this seems, a short features-benefits of doing so might be in order.
Merely a suggestion. Delete as you wish.
I'll bite. As conceived and shipped, an NSLU2 is a(n unremarkable) network storage device. Able to provide public or private access to files via a web interface. Limited by as much linux power as can be squozen into a very limited ROM, it's ho-hum.
With a new-firmware brain, the NSLU2 suddenly becomes a Superhero's Sidekick, able to leap tall buildings in a single bound. Freed from a requirement that "Linux fit into a small ROM," unslung NSLU2s? wake up looking for bootable linuxes on external hard drives FIRST, falling back to ROM at last resort. Thus, they can have much (much) larger linux distributions residing on one of the hard drives.
Larger linuxes means more-capable linuxes: can you say "ssh instead of telnet?" How about "media server?" "Web server?"
How about the idea of having a server on your network eating 10W instead of 150W?
(Am I getting through? BTW, I'm taking a break from ~programming in Perl on the Slug~ to write this... :^) )