Well... i figured out how to unzip it via xterm.. so i'm in the process of manually making it into:

debian-squeeze.img.ext2

via the xterm.

If that doesn't work.. i'll delete that one. and try your method of putting the .tar.bz2 file on the external SD card and running the installer from the extras section.

Thanks for the quick response though!

will post how it turns out. (ha ha ha.. after the image decompresses, i still need to figure out how to run debian stuff.. i'm so new to this!!)