I have seen FBReader freeze on large files (e.g. 7 MB CHM) and large dictionaries are apparently a problem for MobiPocket Reader (24 MB:
unable to open mobipocket dictionary). I assume this is due to a lack of memory, but I don't know this for sure.
On the Nokia 770, you can add 64 MB of swap space on a MMC card. See, for example,
Setting Up Swap on MMC. There were initial questions about write cycles, but I am not aware of anyone actually wearing out a MMC card by using it as swap space. I would be concerned about adding swap on a CF card, because these don't always mount at boot time. In any case, the addition of card-based swap would need to allow for the possibility that the card was missing at boot time.