Not knowing any better I decided to install the burned copy of Yellow Dog Linux 6.2 I had lying around somewhere (I used it back in the days before firmware 3.21) - when installing it it wouldn't recognize the bigger vflash size and just reported that the partition it was about to format would be 10GB. After the GUI installer was done, when it returned back to the XMB, it would report that the harddisk had became corrupted and that it would need to be reformatted again.
So I'm guessing distributions which used to work on OtherOS don't work on OtherOS++ without a Graf kernel patch? Perhaps someone wants to go to the effort of making a special Yellow Dog Linux 6.2 ISO that is compatible with OtherOS++?
Or can anybody point me in the right direction of doing this for myself? I could manage compiling my own kernel and just applying a patch - that is no big deal.