I've been working the past two days on debian-cd, which was the main thing (besides git-annex assistant) I planned to work on at DebCamp.
Yesterday, Steve McIntyre and I cleaned up some cruft in debian-cd's package lists. This freed somewhere in the area of 30 mb. I also took a grep through d-i and made sure the CDs include packages that d-i can optionally install in some situations.
Today, I investigated how Recommends are ordered on the CD, and concluded it's as close to optimal as can be easily achieved. So was not able to save space there, but I did find a way to reorganize the desktop task that avoids needing to include a lot of printing stuff and some other stuff on the first CD. While that helped some, it still didn't get either Gnome or Kde to entirely fit, so getting there will probably involve rebuilding 100 or so packages with xz, if someone decides to do that.
So it's stil TBD whether Gnome or Kde will fit on a single CD in Debian wheezy. At this point I think most of us are getting tired of fighting this increasingly losing battle every release, and so other options like only having a desktop DVD are looking more appealing, as they solve the problem long-term. This would also free up the first CD for other interesting use cases, perhaps xfce, or perhaps a CD targeted at server users, and/or containing high-popularity non-desktop packages.
I wonder what method Ubuntu uses - it is definitely not debian-cd though. Maybe their method could be adapted to later releases.
I think having a CD install even a basic GNOME/KDE is important. Significant regions of India do not have high bandwidth connectivity, a CD takes about 6-8 hrs to download, and a DVD would make it much worse.
If it not at all possible to fit GNOME/KDE, then a single CD Xfce version would be excellent.