I am actually involved in a similar project, albeit a separate distro with some things stolen from VL. We'd gladly dump our project and go with VL-Light if it meets our needs.
Footprint: shoot for 210MB or less. That's a 3"/5cm mini-CD. That would make VL-Light a pocket distro like GoblinX Mini, NimbleX, Slax, Mustang Linux, TinyMe, etc... You can get a large part of the rest of the way there by removing the man pages, documentation, and i18n/i10n from the packages and offering them as separate packages in the light repository. You'd be amazed at how much smaller your packages will become. Take a look at these distros and the apps they offer to see just how much you can cram into 210MB. Installed size should be <1.0GB.
RAM: I can make VL 5.9 run neatly in 32MB of RAM. I've done it. Really. Abiword and gnumeric run fine. So does dillo. Opera is just about OK. GUI text editors are happy as clams as is Bluefish. xv works for photo editing. Xfe is my file editor on the 32MB system. At 64MB Opera is decent and GIMP is just about usable. Some multimedia stuff can just about work at 64MB of RAM. SIAG Office is smaller than AbiWord/Gnumeric and is lightning fast even at 32MB of RAM but it lacks functionality. I'm packaging it for 5.9 anyway.
Installer: Make sure hosted installs (the vinstall scripts) stay on the iso. Older and green hardware may not have a bootable CD-ROM drive.
Wireless works but wifi-radar doesn't. OK, it does if you don't mind waiting half an hour for it to react. VL-wifi is the correct answer here.
E17 and Xfce are both really bad ideas at 64MB and unusable at 32MB. Fluxbox is a bit poky, too, and is noticeably slow at 32MB. Good choices: JWM, PekWM with fbpanel, aewm++ with fbpanel, windowmaker, afterstep. If you go minimal you can use Esetroot to put the background in when launched. I'd offer two choices, maybe three. Fluxbox is the heaviest one I'd even consider if this was my project, which it isn't.
Yes, trim /usr/share/wallpapers down to half it's current size or less. Make the rest (and more pretty wallpapers like the ones that come with fluxbox and Xfce) an optional package in the repository.
Things I'd like to see: something like VL-Hot that works with a minimalistic window manager. That would be unique and very cool. I'd also like to see a copy2ram option like the linux-live scripts even on a conventional install.
....Oh, and yeah, I'm volunteering to help.