After many trials and failures, I've got the T5700 running the way I want. The hardest part is installing what I wanted with only 256MB of flash disk while running 256MB RAM.
The first thing I needed to do was wipe the flash disk and reinstall XPe. I followed this guide here to do that, remove unneeded apps and get admin access.
Installing Perl was an adventure. I used the zip version (not MSI) of ActivePerl to install it. That way I could go step by step through the installer.bat file and figure out what broke. One problem I kept having was running out of RAM while the installer ran. I killed pretty much every unnecessary process I could even explorer.exe until I ran into an error that said "Can't open nul: No such file or directory." After some Googling, I found out the XPe install doesn't have a NULL driver. I stumbled onto this old post that seemed to address my issue, but like the poster, I couldn't get the registry script to run. Eventually, I figured out it was a permission problem. Once I got that squared away, I was able to get ActivePerl installed. I ran PPM to install the Win32::MultiMedia package, copied my gameport script over, ran it but it didn't work. It still couldn't see the gameport.
After trying a number of different things, including accessing winmm.dll from Perl, I was about to give up. Then I read this post that mentioned installing DirectX on the T5700. Turns out there was compact DirectX 9.0C install for the T5700. Read the install instructions, changed the TMP and TEMP environment variables and it installed perfectly. Fired up the script and it worked!
However, it didn't appear that the XPe supports DCOM, so I had to come up with a different way of getting the data back to the server. I went back to xPL, using the command line xPL sender and calling that from my Perl script whenever an input changed. Good enough.
Next I tried to install a webcam on it, but the Logitech drivers just didn't seem to work right. I have a QuickCam Express and a QuickCam Messenger and neither would come up. So I scrapped that until I can try some different cameras.
So finally it's deployed - my little digital input over IP project. It only has 3 contact closure inputs connected to the Super JoyBox 8 (which can have up to 16). Now, I can relax and figure out what other things I can monitor with it.