Hardfile need .HDF extension to be found by OSD.
I will try to copy al necessary data to a smaller (100MB) hardfile but PIC will stay quite slow.
I have an 80MB hardfile setup on my 2MB mimimig with the PIC chip and after turning on the directory cache option when formating the partition it is quite usable and probably comparable to the speed of my first 2.5" 80MB harddisk supplied with my A1200 when it was new. So no speed demon and a lot slower than modern harddisks even when used on a classic Amiga or the ARM controller on my 4MB minimig but faster than floppy disk.
So worth while for playing a few games like Civilization, Colonization, Eye of the Beholder, the settlers and even Beneath a Steal Sky from harddisk you just need remember to keep the partition size small and only install a few games that really benefit from HD install plus using a light weight distro such as BetterWB or just a standard workbench 3.1 install as making the most of a small hardfile as making the size larger really has a large negative speed impact.
There is also nothing to stop you having more than 1 hardfile on your SD card and swapping between them if you want to have more software installed than your small hardfile will allow.