As requested by robbiethe1st, I now post my findings on using BackupMenu with a stock maemo kernel. The terminal mode will not work for starters, this is mainly due to the fact that there are lack of console fonts (kernel modules). The end result is that the user gets a blank screen with a rather nicely lit backlight. Pressing Ctrl+D (which is the default handle for logout) gets the user back to BackupMenu.

(update 18/08/2011): USB console requires USB networking to be started prior to starting the USB console. If USB console is started before USB networking is started or when USB networking was not even started one cannot get a login screen.