Spotted in the MAKE Forums:

If you’ve been needing some extra space for your microcontroller program, then you might want to take a look at Wayne Holders’ latest project, Magnetic Core Memory for Arduino. All you need are some H-Bridge drivers, a separate power supply, and a piece of hard ferrite, and you’ll be well on your way to adding an extra bit of storage!

OK, core memory might have gone obsolete a long while ago, so if you really need the space I suggest using some external i2c EEPROM chips. However, if you are interested in learning about how magnetic memory works, then I definitely recommend checking out his project. Bonus points to anyone who figures out how to patch avr-ld to make use of the extra space!