I seem to be more successful with the sudo method. I tried the gainroot method and the debbie script seems to have problems in that it doesn't give user root access (ie runs the debian script as user instead of root, might be the EOF line?).
Also having difficulty with the bootmenu.conf. It appears that the new bootmenu.sh doesn't require the bootmenu.conf anymore. But I tried to specify a bootmenu.conf with mmc2 instead of immc2 and ended with the same results. I also tried this command:
chroot /mnt/initfs cal-tool -R ask:immc2
suggested by fanoush in his post #116 of this thread. Not really sure what this command is doing or how I should run it.

I might try formatting my external 4gb card and give that a go when I get some more time. I seem to be so close but not there just yet.