After a weekend of learning about embedded linux, uclibc, and the freewrt and openwrt projects, I'm getting the feeling that there is a great opportunity for running linux on embedded network appliances as well as FreeBSD. In fact, it might be an easier road for me because of the amount of various projects and documentation available - however messy and disorganized it may be!
The FreeBSD embedded projects like m0n0wall are pretty amazing, but to get a shell and a web server on a device that costs around $50 with 4MB of flash rom and 16MB of RAM is outstanding.
On the flip side, don't know how feasible it would be to install lighttpd (though only 71kb) on such a device. Also, looks like there is no ipkg for php, though it looks like the FreeWRT toolchain has the ability to build it into an image.
Somewhat unrelated, I just found this decent thread about routers here.