Turns out, the latter is not what you think it is. Quite the opposite, you can’t actually install applications from the Marketplace directly on your microSD card. What Microsoft means here is something completely different - you can use the microSD card to install application ON the phone’s internal memory FROM the card, not the other way around.
The benefit that comes with this is that if you’re a developer you can physically distribute your application without going to the Marketplace, and bypassing that might be an interesting solution for some corporations. This will also eliminate the sometimes lengthy app review process.
So if you want to have a couple of those graphically intensive games that often weight in the vicinity of a couple of hundred megabytes to a gigabyte or so, you’d have to rely only on your internal storage. That means that 8 gigs should really be the minimum for you, and if you’re a gamer that would hardly be enough, and we’d recommend getting a phone with even more.