The core of the Linux kernel is running out of the onboard flash but the rest is all executing out of that RAM. Kernel drivers, userspace app, and 16-bit WVGA LCD framebuffer. And there's no I or D-cache on this part. =( My app is currently running with memory 75% full.
Just the other day some guy has launched a Kickstarter with a very similar design, but with a bit more breathing room memory-wise:
The trick to Qt on this part was to avoid QWidget and do everything in QGraphicsScene. For some reason it's just a lot easier on the processor. QML is a non-starter on a part this slow in case you were wondering, so Webkit and QScript and all of that is compiled out.