[EDIT: THIS METHOD DIDN'T SOLVE THE PROBLEM]
I've solved it without having to create a partition.
Somone suggested this in another one of these topic threads, but to save people the hassle i will post it here.
Basically, do a clean install of the CyanogenMod7. As though you were coming from stock.
Follow these instructions from the Wiki
DESIRE GSM UPDATE WIKI
Quote
Second Method (via Recovery)
1. Download the latest version of CyanogenMod.
Optional: Download the Google Apps for the device.
2. Place the CyanogenMod update.zip file on the root of the SD card.
Optional: Place the Google Apps .zip on the root of the SD card also.
3. Boot into the ClockworkMod Recovery.
4. Once the device boots into the ClockworkMod Recovery, use the side volume buttons to move around, and either the power button or the trackball to select.
5. Select the option to Wipe data/factory reset.
6. Then select the option to Wipe cache partition.
7. Select Install zip from sdcard.
8. Select Choose zip from sdcard.
9. Select the CyanogenMod update.zip.
Optional: Install the Google Apps by performing steps 7 - 9 again and choosing the Google Apps update.zip.
Once the installation has finished, select +++++Go Back+++++ to get back to the main menu, and select the Reboot system now option. The HTC Desire should now boot into CyanogenMod.
Obviously you want to do a NANDROID BACKUP before you do this.
What i'm going to try now is restoring only a few apps (opposed to all the apps like i did last time) from the Titanium Backups i made (Gun Bros and some other games) I will report back if anything goes wrong.
[EDIT] So far so good, I used my titanium backups of a few games that had data i didn't want to lose. I also did a test and downloaded a fresh copy of Cordy, and the 27mb downloaded as smoothly as always.
This issue is more or less solved between the two methods.
All the best fixing it.
Edited by Pants Mahoney, 12 April 2011 - 04:38 AM.