I didn't quite go to that low a level... I let Titanium move it for me. In fact, I never even had to learn to use ADB, thanks to Z4Root. (I journaled my noob rooting experience here
So, if you do set the bit in the installation package that says "movable to SD", does that prevent the app from being installed on Android 1.6? That would definitely be an issue for an app like yours, that by its nature needs to support as many Android versions as possible.