Matt,
2. Is it possible to not use any package group at all and simply select the packages I want ? In this case I would just list out all the rpms in the @core group and thats it .. possibly some extras.
Assuming you have a machine to play with this is an easy experiment to do. Do a "minimal" install and then harvest the kickstart file from /~root and save a list of the installed packages. Delete all the packages at the end of the kickstart file then list only the ones you want. Try an install with the new kickstart file. One of two things will happen depending what flags you have in the kickstart. Either the installer will autoselect any dependencies you are missing or the install will fail on missing dependencies. If your kickstart file is configured for the first option you can compare the package list on the new install to the "minimal" configuration package list. If the package lists are nearly the same then the minimal install is truly minimal and you are stuck with ~500mb. If the package list is smaller then you will be closer to a your goal. My guess is that RedHat chose the "base" and "core" nomenclature for a reason. Every other package depends on those packages. Good luck! -Adam