I understand that Time Machine isn't bootable. That's the primary reason for the second, small partition. It has a complete install of Leopard and actually many apps, including TTP. There is actually a third even smaller partition that was/is mainly for storing stuff on the external
while TM is ON. As you say, TM has few controls, namely the only one is a 'switch' for ON/OFF ( apparently Apple feels a check box is too old hat!).
And I'm told that when TM is ON, it 'assumes' control of the whole partition it has been assigned and will not allow anything else to use that space. Thus, if the HD is on and TM is also, I still have a partition that can server as a place to dump stuff I want off the internal.
On the good side, TM does not waste as much space as we might think, so I'm comfortable with using more of the 1TB space.
I plan on using SD also, when it becomes available, just to not keep all my water in the same bucket, or all my jewels in the same box, or whatever that saying is...