I have been running VL on my desktop without a hard drive for months now.http://supergamer.org/vl/forum/index.php?topic=4564.0
My main motivation was noise reduction, not speed. Initial experiments were done using only the flash drive on an IDE adapter, and that worked just fine.
I ended up adding a mix of other storage devices to address various issues like total storage capacity and expansion possibilities, plus reduction of write cycles to flash memory. The end result was a machine that is faster than it was with the single hard drive, very quiet, with no reduction in capabilities.
Not all flash memory is equal, if you use the really cheap stuff I think you will find it slower than a hard drive. Even my 266x card can not match the sustained raw throughput of a fast hdd.