I'm not sure but it could be that you don't have bzip2 installed?

Did you do this before starting the installer?

apt-get install bzip2 wget
apt-get install multiboot multiboot-kernel-maemo

If yes i'm not sure why it's bailing?

You could turn to this forum for help wich is the official site for NITdroid, most problems has been asked and solved

www.forum.nitdroid.com