once filesystem is mounted it does not matter whether the source filesystem is card with ext2 or internal flash with jffs2. Cloning from internal flash or mmc should be same. People reported success even with internal flash (and 16GB cards).

I still think you do something wrong when partitioning, formating or cloning but don't know what it is. But if you want to track this down you can boot into usb network recovery mode and try mounting it by hand from initfs environment and see what is wrong.

Once you login over usb via ssh or telnet try this:

1. insert each module you have in MENU_X_MODULES item (normally mbcache ext2)
2. try to mount filesystem like this:
mount -t FSTYPE -o FSOPTIONS /dev/DEVICE /mnt/new_root

DEVICE is partition name in MENU_X_DEVICE (mmcblk0p2)
FSTYPE is filesystem name in MENU_X_FSTYPE (ext2)
FSOPTIONS is mount options (noatime)

with default settings in bootmenu.sh for second partition the line should be

Post any errors you see, post output of 'ls -la /mnt/new_root' and 'ls -la /mnt/new_root/usr/sbin'. Then you can unmount it 'umount /mnt/new_root' exit shell and continue with booting.

The 'boot from xx failed' is printed when mount fails or in cannot find executable /mnt/new_root/usr/sbin/init

EDIT: for details about usb networking recovery mode please read included README.txt in initfs_flasher directory

Also when the mount fails post output of 'cat /proc/partitions'