Installing Android ROM on a HTC HD2 on the SD card - Performance impact?
Quite a few people dual boot Nook Colors (internal vs sd card).

Take a look at this xda thread on running CM7 on the sd card (for the Nook Color) and this thread about booting from sd card performance.

In short, it really depends on the read/write abilities of the sd card you use. A crappy sd card is going to give crappy performance.

(Sorry for the specifics to Nook Color, but in general, it should be similar)