HTC Desire. Memory question.

It can't be done under Android 2.1, only under 2.2 (Froyo). Even then the application itself has to have been written to take advantage of that and in my experience, most of them aren't (yet, hopefully that will change).
 
I sometimes get 'updates' for some of my Apps that include a new 'saved to SD' section in the new App . Its like The_LHC says , it will depend on the app itself most of the time.
 
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