I fixed this problem by 1. find ext2.ko and put it in your sdcards root directory, 2. modify the bootdeb script in /data/local/bin to read
mount -o remount,rw -t yaffs2 /dev/block/mtdblock3 /system
export kit=/sdcard/debian
export mnt=/data/local/mnt
export PATH=/usr/games:/usr/local/bin:/usr/bin:/usr/sbin:/bin:$PATH
export TERM=linux
export HOME=/root
busybox insmod /sdcard/ext2.ko
mknod /dev/loop2 b 7 0
mount -o loop,noatime $kit/debian.img $mnt
mount -t devpts devpts $mnt/dev/pts
mount -t proc proc $mnt/proc
mount -t sysfs sysfs $mnt/sys
sysctl -w net.ipv4.ip_forward=1
chroot $mnt /bin/bash
busybox umount -f /data/local/mnt/dev/pts /data/local/mnt/proc /data/local/mnt/sys /data/local/mnt
busybox losetup -d /dev/block/loop2
chmod it 4777, and run it, worked for me