1) what is the very latest operating system that can be installed on a raq550 using the standard install over network?
2) are there any known tricks that will enable one to install an even newer OS onto a raq550?
thanks for any advice.

You can install strongbolt (1 or 2), raqstar or better : blueonyx (some people have realised an installation of debian.

http://www.mr-webcam.com/viewtopic.php?f=19&t=23