Trying to follow your post but got stuck extracting the base system, ran out of space, i think the problem was;

Does this not point to the swap partition? I guess it should be partition 3, the ext3 part, which gets mounted here?

Seems to be going well now, extraction success! I'd had problems with the insmod commands, so the mount didn't give any error mounting the swap partition, so i was actually extracting in the built-in memory space rather than the memory card.