NOTE: This portion has not been updated.
Okay, now comes the fun part: Figuring out what files need to be on the system disk, and what packages that you want (and can fit) on your ZIP drive.
I decided that the easiest way to get started was install Slackware directly to the ZIP drive. I decided on this approach mostly because Slackware is a smaller distribution then Red Hat, and it would be easier to trim out what I didn't want. That and the fact that I am using the Slackware distribution anyway made it an obvious choice.
Installing Slackware onto the ZIP disk is easy, as root run the setup program, and choose /iomega as the install to partition, set the install from partition to where the Slackware sources are (cdrom, hardrive, etc), select install and follow the prompts.
The hardest part is deciding what to add, and what not to add. Obviously, you'll need the 'A' series (Which is about 8 megs), the rest is up to you.
I managed to trim down the Slackware release to a respectable installation of 70 megs, which included gcc/g++, perl, X11R6 (NOT ALL OF IT!), sendmail, online docs (Minus all the development man pages, but including all the howto's), and an assortment of other goodies, while leaving about 10 megs free for user files. YMMV