Okay, I'm going to post this to make sure I don't forget even though I haven't finished fully characterizing the bug yet.

The software in question which is present by default is the shell (ash/BusyBox), and the file in question is "~/.profile", which affects the behaviour of the shell. It's a standard config file which is executed by most shells if present. Mine contained the one line "source ~/MyDocs/myprofile", which would then execute the file ~/MyDocs/myprofile that contained a number of aliases that made it easier to use the command-line.

It turns out that the shell is not just invoked when I run the Terminal, but also on boot-up. But on boot-up, the RAM disk MyDocs is not yet mounted, so the file ~/MyDocs/myprofile does not yet exist. Unfortunately, this results in an error which renders the N900 unusable.

The workaround is to make sure ~/.profile will work even when MyDocs does not exist, or not to use ~/.profile at all.