I am not sure about your problem, but another direction you could go
is using gparted. I used to follow the beginners guide to getting
Angstrom to work, but it takes a lot of time and using gparted
partitioning tool you can do it in a matter of seconds. Then all you
have to do is copy the MLO, U-bin, and Uimage file to the first
partition and copy the Angstrom to the second partition and untar it.
Thats what I have done and it has work pretty much every time.