What I did was simply not to use the LAST downloadable image of OS2007HE - used the previous one instead.
Then repeated the formula except for the fact that I was no longer able to find BECOMEROOT. So installed EASYROOT and issued the same SUDO GAINROOT command. It worked.

As I was moving backwards, as a precaution the real sequence was:
1. Last 2006 image placed back in the tablet
2. OS2007HE - previous to the last available
3. Installed XTERM
4. Installed easyroot

The formula was exactly the winning one - shown is the beginning of this thread.
One last word. I am not sure that if I reinstalled the very same last OS2007HE it would fail.
The point is that I lost confidence in my installation simply because I messed up with it too much. (mostly learning XTERM and its use w/the external card)
So, someone could try it again.
As a side product: now I know a little about Linux...
Thanks for this great thread!!!!!!!!
Jorge