So after some looking around, apparently Android/Linux, like Windows, requires ~10% free space. Not sure if its the same reason as in Windows, so maybe one of the Linux gurus can chime in. If I at least know why, then I'll feel better
I really prefer to not keep apps on the SD card. It loads slower than internal memory, and I've found that it mor easily becomes corrupted. Just last night I did a nandroid backup so I could try out cm9. Restored my backup and all the apps on the SD card had become corrupted and no longer showed up on the system. That's a few times now where I've had issues like that. Say what you want about iPhones, but there's dry good reasons they don't use SD cards.