iOS 5 works great on iPhone 3G S. If you’re having performance issues, you might want to free some space on your iPhone 3G S; that has been known to work miracles.
It doesn't use it to implement paging, but many things do use the disk as a cache (URL cache, keyboard cache, icon cache, Spotlight, app-specific caches, etc) and running low on disk space will cause the background cache cleaner daemon to run.