I got your email, but didn't how to respond. I personally use UBuntu in a virtual machine. It is very easy to install and use. Any linux distribution should work though.
You could try andLinux, which is a pre-packaged UBuntu install using coLinux (cooperative linux). This runs the linux kernel along-side Windows without a virtual machine. Just make sure you are using a case sensitive ext3 file system.. I mean, make sure not to extract the firmware to a Windows NTFS or FAT share as you will lose files and have extraction errors. I dunno what the total size is.
As for general questions about how to install linux, and/or how to get a distribution under a certain size, I am not really in a position to help with that. There are surely forums out there targeted towards general linux installation questions.
The FMK makes modifying compatible firmwares very easy, but the user must be able to at least install and use a linux shell. Porting to Windows is not feasible due to the difference in the file system. I'm a Windows user and developer too, so if it was easy to port it, I would have. I did try porting it to Cygwin, and it might work there, assuming you are operating on an ext3 (or similar) case sensitive file system with appropriate permission and device support.
Also, please remember I am not affiliated with DD-WRT, and have had to work around DD-WRT's efforts to make it MORE difficult for you to modify their firmwares. The FMK is just what it is, nothing else is offered.