Distribution roulette
Before starting with pyneo you have to choose a distribution that comes with pyneo. There are already some and here are the descriptions on how to start.
Debian
The best maintaned distribution in regards of pyneo is for sure Debian. Read the howto to start.
OpenWrt
A work in progress is OpenWrt which gives a much smaller memory print and faster startup. The howto will fully describe the installation soon.
OpenEmbedded
pyneo stopped supporting OE some time ago. In the howto you may find interesting links if you like to invest some work to get it running again.