Adding packages to a build is usually better than adding them to the overlay, as the build compresses the package. It sounds like you'll have to really be careful with what you install on that device and might need to strip more out, such as PPP and variants. (Typically "no LuCI" would be the first step, but I'm guessing that would defeat the point of travelmate).
You might look through the support thread to see how others are managing this