[GT540 Optimus Android Development] fishears:
I don't think anyone has posted a tutorial for this on XDA yet (apologies if they have!!!) and the Google Translate of Mur4ik's original instructions on 4PDA is pretty poor so here's what I did to get my phone set up.

What does this do?

This process flashes a modified KDZ which will change the way your phone's memory is partitioned. The result will be that you have 234mb of internal storage for your apps, 150mb for the system and 64mb for cache.

According to Mur4ik, this is the optimum allocation of memory for best performance.

Once this process has been done, any ROM that you flash will have more internal storage space without any further modification. You should not flash a data2system rom.

With this method you will still be able to apply update.zip files with recovery (like Mur4ik's rom updates). This feature does not work on data2system roms.

Things you'll need:

1) KDZ Updater

2) Mur4ik's modified KDZ (MD5SUM: e582d471ed9aede3dd9279b20f7a948c)

Assumptions:

1) You know how to back up your ROM

2) You have access to a Windows PC with drivers installed for your phone

First of all you should back up your current ROM with recovery.

OK, let's get started:

Turn the phone off, remove the battery, SIM & SD Card.

While holding Volume-Down, connect the phone to your PC and run KDZ Updater. The phone display will show "Download Mode".

Select "CS_Emergency" Phonemode in KDZ Updater and select the "20E 234 150 64.kdz" KDZ file downloaded above. Then click "Launch software update"

The update will now start. During the update the phone screen will display "Download Mode" and eventually an animation of the battery cover being replaced. At this point you can disconnect the phone and replace your SIM, SD Card and battery *

Put your phone into fastboot mode (hold Camera and press Power) - the fastboot screen will now be BLUE and have white text displayed on it (this is correct).

Connect to your PC and in a terminal type:

fastboot erase system
fastboot erase userdata
fastboot erase cache

flash recovery back on to your phone

fastboot flash recovery recovery.img

Boot your phone into fastboot or recovery

Your phone is now ready to go and you can either restore a backup with recovery or flash a ROM with fastboot. You must be sure that your backup or fastboot images do not exceed the sizes stated above. So, your system.img must not be larger than 150mb, your data.img must not be larger than 234mb and your cache.img no larger than 64mb.

Note:

If you were already using a data2system rom and want to restore your backup after carrying out this process then you must do the following in the backup's folder on your sdcard:

- replace your boot.img with one from a standard version of your rom (i.e. non-data2system)

- rename your "data.img" to "system.img" and your "system.img" to "data.img"

- delete the file "nandroid.md5"

- open an adb shell (or run terminal on your phone) and type "su" <enter>, "cd" to the backup folder, type "md5sum *.img > nandroid.md5" <enter>

- you can then restore the backup with recovery.

How to restore your phone to standard memory allocation?

Follow the steps above but use any standard fastboot enabled kdz (like this one). Then flash your rom or restore your backup - just remember you now have a smaller data partition ;)

Special thanks to Mur4ik, EazyLuke & M1st3r1

You do of course follow these instructons at your own risk. Have fun!

*For me, the update process continued successfully beyond this point but some people have reported errors after the animation appeared so it is safer to remove the USB cable here.