Okay, this is what I have done, and will be usable from BetterWB 3.9 onwards:
Wether you are upgrading from a previous version or installing from scratch, you will have a hidden option to save those 3.4 MB of HDD space I mentioned above. You just need to select the Window-> Show all workbench menu option when on the BetterWB upgrade floppy or on the first BetterWB install floppy (Misc3.1). Now you will see a drawer named ADVANCED. Inside it, there is a script that when executed frees the space. Remember to execute it after installing BetterWB.