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I made app like this and I used xml-s generated with php. This enabled us to have a single provider for 3 presentation layers which were:
We used xslt to convert xml to html on websites and kXML - very light pull parser to do it on j2me app. This worked well even on very old phones with b/w screens and small amounts of memory.
Besides on j2me there is no concept of file. You have the db in which you can store information. This is a link to "mobile" website. http://mobi.krakow.pl/rozklady/
and here to the app: http://www.mobi.krakow.pl/rozklady/j2me/rjk.jar
This is in polish, but I think it's not hard to figure out what's this and that.
If you want, I can provide you with more help and advice or if this is a commercial product then I think we can figure out something too ;)
I think your issue is requirement 2.
Updating 10MB of data just because 4 digits changed somewhere in the middle of the file seems highly inefficient.
Spliting the data into several files allows for a better update granularity that will be well worth the added code complexity.
Real-time public transport schedules are usually modified one bus/train/tram line at a time.
Persistent storage on J2ME is a tricky business; see this related question for more general background: Best practice for storing large amounts of data with J2ME
In my experience, J2ME persistent storage tends to work best/most reliably with many small records rather than a few monolithic ones. Think about how the program is going to want to access the data, then try to store it in those increments in the J2ME persistent store.
I'd generally recommend decoupling your client-server protocol for downloading updates from the on-device storage format. You can change the latter with every code update, but you're pretty much stuck supporting a client-server protocol forever, unless you want to break older clients out in the field.
Finally, I know there are some people on the Transit Developers group who have built offline transit apps in J2ME, so it's worth asking for tips there.