Well, "./tools/install_image.sh" is NOT written/designed to do what
you think it can do..
It ONLY installs the kernel image, modules, and firmware to an SD card
with an EXISTING bootloader/Linux OS/etc..
Grab an image from here first:
http://elinux.org/BeagleBoardUbuntu#Demo_Image
run the "./setup_sdcard.sh" script..
Then you can run "./tools/install_image.sh" on your new card...
Regards,