Yeah, it will be setup/flashed the same way as Icarus. Once you have a custom recovery image on your phone, it all becomes pretty easy. A 2.2 rom would support froyo's native apps2sd, which allows the moving of apps to the sdcard if the dev allows it. On top of that, you can tweak it in CM settings to allow you to move any app to the sdcard like that. And on top of
that , you will have the app2sd+ that you have with icarus.
CM6 is built from source, not by porting from another phone. The bits that are the issue are hardware drivers + the kernel, which are obviously specfic to your device. Now, it's certainly better for everyone if you can get hold of a 2.2 kernel, but it's not the end of the world. My phone only ever recieved 2.1 officially, yet I've just updated to 2.3.3
It may be a bumpy ride, but devs seem to get it running in the end. Like the G1, the first android phone AFAIK, is still getting new versions of android.
It would be fully functional yes.