I have spent almost all day trying to fix this, and I finally have, however there was no help on the net for this issue, until now.

Issue:
you can install Canola beta2 1.0.1 from their 1click install on their site. It will install all the way and then at the end say 'unable to install canola'. Yet you can still run it, it just never finds any media.

Solution:
I finally just went to the root shell(in xterm) and did a manual apt-get and found that avahi-daemon was not installing and screwed up the install for Canola because other components of Canola depended on it. So I google and found a ambiguous reference to the package avahi-daemon and this repository: http://www.oakcourt.dyndns.org/maemo/bora/

Instructions:
1) go to http://www.oakcourt.dyndns.org/maemo/bora/
2) download the .deb files for libcap1 and avahi-daemon
3) install either with `dpkg --install /path/to/DEBFILE.deb or by double clicking on them both, libcap1 first, then avahi-daemon
4) try to install Canola again, it should report no errors
*note: use the real path to the deb files, not the one in step 3, it's for demonstration
purposes only
*note2: i used the root shell/dpkg to install the deb files, i only assume the app
manager will work, too

Aftermath:
Canola now runs fine and i'm getting familiar with it. There are some issues with the app as a whole, but it is kinda neat. Maybe i'll code an open version of it and improve the UI a tad. I'm thinking python is the best choice for the n800


Phrases to help people find this thread:

PS - this is my first post, and probably not my last. My new lil' n800 is pretty sweet