It seems the POGO-E02 does not have enough free memory to download the latest and greatest ArchLinux Arm. While experienced Linux hands have already figured this out, for me it was another important Linux learning experience.
My solution was to used a 2nd USB flash drive to hold the download. I suspect I could have just as easily used a separate folder on the 'alarm' drive but you can try that yourself. (SoCalTom has provided an elegant solution at http://archlinuxarm.org/forum/viewtopic.php?f=58&t=7980&start=10#p43282.)
Here are the steps I used. Note frequent references to steps on http://archlinuxarm.org/platforms/armv5/pogoplug-v2-pinkgray. These instruction assume that both mke2fs and bsdtar are still in your /tmp folder after your failed attempt to download ArchLinuxARM-kirkwood-latest.tar.gz.
1. Remove the ArchLinuxARM-kirkwood-latest.tar.gz partial download from /tmp.
2. insert a 2nd USB flash drive (256mb minimum [Yes, I have one of those in my desk drawer

3. Start fdisk to partition the USB drive:
$this->bbcode_second_pass_code('', '/sbin/fdisk /dev/sdb')
4. Set up new partition on sdb per Step 4
5. Create the ext3 filesystem on sdb:
$this->bbcode_second_pass_code('', 'cd /tmp
./mke2fs -j /dev/sdb1
mkdir ws
mount /dev/sdb1 ws')
6. Follow these steps in lieu of Step 6 on http://archlinuxarm.org/platforms/armv5/pogoplug-v2-pinkgray
$this->bbcode_second_pass_code('', 'Download and install Arch Linux ARM:
cd /tmp/ws
wget http://archlinuxarm.org/os/ArchLinuxARM-kirkwood-latest.tar.gz
./tmp/bsdtar -xpf ArchLinuxARM-kirkwood-latest.tar.gz -C alarm
sync
umount alarm
umount ws')
7. Follow the rest of the instructions (Steps 7 through 10) on http://archlinuxarm.org/platforms/armv5/pogoplug-v2-pinkgray.
The rest of my install went smoothly.
With all due respect to the site managers, it would be helpful to update the instructions on http://archlinuxarm.org/platforms/armv5/pogoplug-v2-pinkgray to let people know that there is not enough spare storage on the POGO-E02 to hold ArchLinuxARM-kirkwood-latest.tar.gz and either update the instructions or link to this post.
Many thanks to all for your hard work in making this available to all of us.
Cheers,
Tom Balaban