Yes, exactly, there is a minimum. I don't recall exactly what it is, but I think either 5-10K. The only problem with your suggested strategy is that we have a list of Non Transaction Fee (NFT) funds we can invest in within the mutual window, but that list does not include any of the low-cost index funds I would want to invest in (no Vanguard options, for example). So I have to pay 19.95 to buy or sell the funds I want to buy. So.... I should minimize how often I buy or sell funds there. It seems kind of shady, true, but I like that I can now invest in a wide variety of Vanguard and similar funds, so I'll take it.
Our base 401K plan has a Vanguard target retirement fund, so I could just put all future contributions there, and once a year move some money out into the mutual fund window. To be honest, I kind of like the idea though of keeping _some_ money in a non-Vanguard funds (the SSgA S&P index fund, for example) just for variety. Though I know that's borderline paranoid.