I finally after running into the "out of space" jazz again decided to try the resize2fs ordeal, and it worked!

Step by step (in case anyone needs more details)

• I opened up a Debian shell and copied /sbin/resize2fs over to /media/mmc1 and then under an OS2008 shell (as root) copied it from mmc1 over to OS2008's sbin. (and I think I had to chmod a+x resize2fs since the FAT SD killed the execute bit)
• I rebooted, since I am too lazy to ensure the image is properly unmounted.
• After rebooting, in an OS2008 shell (as root) I typed: "resize2fs /media/mmc1/debian.img.ext 1512M" - the 1512M can be changed, of course, to whatever your target size is.
• Afterwards, I ran "e2fsck -f /media/mmc1/debian.img.ext2" to ensure there were no errors in the file system (I found a few, but they were fixed).
• Install, install, install.

Warning: Before others do my "opps", remember that FAT doesn't like files larger than 2gb!

Loving this chmod bit, Qole!