I think a lot depends on how efficiently the GDDR3 is used. Most of the PCs I work on still have 256MB of RAM, and it's enough for a lot of the tasks I do. The PS3 is a lot faster than any of them (my fastest PC - at home anyway - is an AMD 1800+ XP), and has very nice hardware. If E17 (or other desktops) can work so that as much of its graphics are loaded into GDDR exclusively, that should help out quite a lot.
A key factor is going to be whether or not we are going to get SPE accelleration. Because if we are going towards streaming algorithms for a lot of the stuff we do that uses a lot of memory currently, that could save plenty of memory. It may take a while, but I do think there are a lot of coders interested in getting stuff done on the Cell.
I do think we will see PS3s with higher memory configurations down the road, if Linux on PS3 takes off sufficiently. But for the most important stuff, the 200MB should do, especially if the GDDR memory isn't put to waste. I think Sony is going to want the PS3 to take off in this respect seriously at the point where the hardware is at its brake even point - i.e. when they don't make massive losses on it.
I also agree that it could be cool to have the GameOS ready to jump into action while you are running Linux, as if Linux was just an application you are running, and the GameOS can still inform you of events like messages or friends coming online, but maybe they should make it optional eventually and also allow for Linux to take over the system completely (except maybe some protection stuff, but that should be possible with very little memory).
Right now though, I'm still stoked that Linux works at all. I'm looking forward to seeing some benchmarks of how it is now, so that we can see how things are progressing as developers start supporting it with more and more specific and optimised drivers.
The idea that I could be programming routines for the Cell processor myself under Linux on the PS3 is very exciting. Even if the RSX weren't available to me, that would already be a cool first step. Of course, I am still hoping very much for OpenGL ES drivers at the very least.