Should apps take up any internal storage when installed to SD? I'm running very low on interal phone memory storage - I'm down to 5 MB of the 180 MB available. I understand that not all apps can be installed into SD card, and those will instead use up my internal storage. Luckily, those are rare.

However, I recently installed an app that is listed as being installed on the SD card, not internal storage. Even so, after installing it I'm now getting the "low on space" warning. The app takes up 16 MB, and I seem to remember I had a bit over 20 MB internal storage space before... So judging from the space, it looks like it's still taking up space on internal storage.

So my question: Should an app that's installed onto SD card take up any internal storage?

What could be causing this? Does the market store the installation files somewhere in internal cache or something as weird? Why on earth do I need to worry about apps consuming space, when I have gigabytes of free space for them on my SD card?

My device is GT-S5570 running 2.2.1.
An app consists of dex files, apk files, data files and libraries.
When you install apps in SD card, not all of the parts of the apps are kept in SD card. Some of them remains in internal Storage.

However if you have a rooted phone, you can use program like link2sd to move all the pieces of app to SD card.

EDIT:

You can use program like app2sd to easily see what program can be moved to SD card. You can manually move shown apps or ignore some of them.

If you go to Settings -> Applications -> Manage Applications, the size shown there is the size its taking in the internal storage. This is just my guess based on the calculations performed by noting the free space on internal storage, moving some apps to SD card and subtracting only the reduced space of the apps.

I'm sorry I didn't mention you need second partition for link2sd to work. But if you had given hint in your question that you were willing to root, I'd have talked in more depth about it. Also your main question was whether apps moved to SD card should take internal storage  or not. It wasn't about link2sd, the term just came while answering. Anyways, beside second partition you are recommended class 6 SD card. I've written a blog post about using link2sd here, you might find it useful.