Not sure about temp file appending but yes it may be related to ^Cing it. 3.4M still sounds too big but maybe plain N810 has some wimax stuff stripped out.

BTW, would you care to figure out which missing part breaks it when removing extra stuff? There is to_remove.lst file and it goes over it and 'rm -rf' 's it. My tip is library in /usr/local/lib. The line that fails is "iwtool radio on" in linuxrc. You could remount initfs rw, chroot to it and try to remove stuff in steps and try to run iwtool after each one.