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mine is grayed out where it says move to sd card...this is using 2.2
That depends upon the app. Some apps support installing directly to the SD card under Froyo, others will default to a phone install and you can move later if desired.I am not sure, but from reading other posts, I believe that you download them to internal memory and then move them to SD card.
Settings, Appications, manage appications, click the app, click "move to SD card".
This only works if the app supports app2SD card(which many devs are slowly but surely doing). And yes, it's a good thing if you want lots of apps without worrying about running out of space soon.
Download SDMove, and see what apps it finds that are able to be moved. If the move to SD option is grayed out, the app doesn't support it.
i can't find SDMove on the market, is that where you downloaded it from?