FYI, I've tried the steps as listed and was also stuck with a blinking light and unsuccessful boot.
I modified the script to use the 700MHz stage1 and the nopci kernel.
I'm using a Vantec NexStar3 NST-360SU eSATA/USB2 enclosure which works fine when set up on eSATA using a regular install and the normal boot-from-flash-and-sda1 setup.
My serial cable has arrived, but I still need to hack it apart and put on the cdrom-style mini connector for the PPV3 serial port.
I'll let you know more when I've done that.
In the meantime, thanks so much for all your hard work! Without this site I wouldn't have bought a PogoPlug