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The problem with internal memory is the limited space. There is only 128mb available in /mnt/free, and something like 4mb on /. Between libraries, programs, and shared files, I have at least 128mb used.
Most programs can't be easily modiifed to be location indemendant. When you compile them, you need to specify a directory prefix. If you do not put the program where it expects to be, it will not be able to load all of the shared files and libraries that it requires. Hence the need for a standard installation directory.
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