Yes, someone recently provided guide for initfs which is similar, for rootfs you just need bigger mtdram, see
http://labs.vivi.eng.br/blog/?p=29

Also if you mount the MMC card directly in desktop linux you can skip the tar make/extract step and copy it on the fly from mounted rootfs directly to card (cloning via two tar's in a pipe could do this effectively too)

Also when we are talking about complex things not recommended for newbies the second (slightly insane) option is to do it directly on the device. You only need space on mmc card and already bootable system on mmc and one spare mmc partition for the result, steps are (in one go, no rebooting between)

- boot from mmc
- download firmware .bin to mmc card
- use http://nopcode.org/0xFFFF/?p=down to extract rootfs
- mount internal flash and make flashable backup via mkfs.jffs2
- unmount internal flash
- flash new HE rootfs via flash_eraseall + nandwrite (or 0xFFFF)
- mount internal flash (with new HE) , clone to spare mmc partition or make a tar backup
- unmount internal flash
- flash old backup via flash_eraseall + nandwrite (or 0xFFFF)

This uses internal flash as a temporary space. flash_eraseall + nandwrite + flashing script example (initfs_flash) is inside bootmenu initfs flasher.

This is only useful if you don't have anything but the N770. Using PC is much easier.