Well I haven't posted for 2 days mainly because I haven't made any concrete progress in the last 2 days. The limitations of the device in question are beginning to be annoying - if only the guys had pushed the boat out and installed 256 MB of RAM it would be a completely different story.
The current thrust of the work in trying to get a useful setup on our micro client has been using VMWare to get a minimal installation of the Slackware Linux distribution which can then be imaged and put onto our compact flash card. The trouble is that even with the cut down kernel and using the excellent package management tool which come in the Slackware setup, as soon as a few packages are selected it bloats very quickly to our 128MB limit.
Another problem seems to be that Slackware has a slightly different folder configuration to the fedora/red hat/centos distros and as a result nagios struggles to configure itself. All a bit painful really and it might be easier to look at another network monitoring tool which is a little more basic.