Space issues and rooting
I have never been a fan of the froyo apps2sd, I was a huge fan of the original "apps2sd" that used an EXT2/3/4 partition on your sdcard. I am not sure if any custom ROMs still support this. I know it is not "supported" in cyanogenMod. You will have to root to go the "apps2ext" route. but if you dont want to go that route, or can't find any ROMs that support it, I don't really know of any way you can really free up any additional space. 

If rooted, you can delete any "bloatware" that is installed on the /system. You can remove z4root after you install it. Another thing to keep in mind, even if you install applications on the sdcard, they can still use the /data directory to store their data, which is located on the devices internal storage.