The disc is already 699MB default! Many people can't properly burn that as it is! It really needs cut to 650 Mb -- or less for things like persistant home and other configuration issues people have mentioned around here.

That said it would be cool to have either:
a. a voteable package with the visitiors to the site deciding what stays and goes.
or
b. a modular package - I see no reason it can't be done. The most basic features would fit in 120MB and each pack would add specific features centered around a task. i.e. php/apache/mysql; samba/persistant home/terminal server....just take the current CD and cut it into slices of function. That way you could have more than one full disc of stuff allowing users to mix-'n-match pieces.