Python should I use threading
For performance purpose, I will suggest you to use threads, process consumes much more resources than threads, it will be faster to create and need less memory (usefull in embedded environment), but of course, you'll have to deal with the common traps of multithreading programmation (concurent access solved by locks, but locks may lead to interlocking...)
If you plan to use many libraries that make low level calls, maybe with C extension developped  that could not release properkly the GIL (Global Interpreter Lock), in this case, processes can be a better solution, to allow your applications to run even when one is blocked by GIL.
I currently have a couple of small applications < 500 lines. I am intending to eventually run them on a small LINUX ARM box. Is it better to combine these applications and use threading, or continue to have them as two separate applications?
These applications plus a very small website use a small sqlite database, though only one of the applications write everything else currently does reads. Due to constraints of the target box I am using Python 2.6.
I am using SQLite to prevent data loss over several days of use. There is no direct interaction between the two application though there is the potential for database locking issue especially during period data maintenance. Stopping these issue are a concern also the foot print of the two applications as the target devices are pretty small.