Strange... I have a couple of applications running under Coldfire Lite, based on AN3518. Compiles perfectly using Codewarrior for Coldfire, special edition. Resulting code size is about 121k I believe.
Your problem might be that the application you're compiling contains a web server, with the contents of the web pages (graphics and stuff) included in the source code as data arrays, which significantly increases the code size to an amount larger than the maximum allowed by the special edition compiler.
Otherwise, try to base your application on AN3470 or AN3518, but to compile these you might need Codewarrior for Coldfire version 6.4 as these don't compile correctly with version 7.0. (based on an older version of iNiche Coldfire Lite, with some bugs inside...).
It is possible to convert those application notes to use the most recent version of Coldfire lite though. I did, and now it works correctly compiled with CW7.0.