Yup.. pretty sure i got the idea that .ext2 was a disk image. Similar to an iso.
And that .bz2 are like a .zip or .rar file.

What I dont know how to do is extract files from the bz2 and create a ext2 image out of them. Only amount of linux i have used is the tiniest amount of ubuntu and the n900. heh.

did a quick search on how i might be able to do this and I was sent to this site: http://www.fs-driver.org/