Espruino on ESP8266

we can fork the espruino/Espruino project under the "esp8266-espruino"

Yes, this is the best way to do it - then you keep all the original commit history. I think this is how Blaz did it...

Is this an all or nothing story?

Not at all - you can 'cherry-pick' the specific commits that you want when merging back. However realistically what will happen is you'll do all the development work and create a separate branch that you 'tidy up' ready for a pull request. You can git diff mybranch original-espruino to see exactly what's changed so you can make sure it's all good.

Then, when you do the pull request it'll come in, and while all the history will be there, if you've made files and deleted them between times they won't end up showing up in the proper espruino project unless someone specifically goes back to those commits.

Only thing I'd avoid doing is changing big swathes of existing code (like tweaking indents or something) as that can cause issues when merging.

Can changes made to "espruino/Espruino" after the fork be pushed (pulled?) into the "esp8266-espruino/Espruino" project?

Absolutely - this is why Git is so popular :)

Git's amazingly powerful, but a bit hard to get your head around at first.

You should probably read through some kind of git introduction... Maybe someone can recommend one - a quick google found this one that might help.