Just posting this in case someone with the same issue finds this thread.
I'll skip the why's and just go to the facts.
I started an lfs with two partitions sdb1 100M, sdb2 10G. I mounted sdb1 as /mnt/lfs and sdb2 as /mnt/lfs/usr.
Because sdb1 was only 100M, I put tools in /mnt/lfs/usr/tools and adjusted the original symlink from
ln -sv $LFS/tools / to
ln -sv $LFS/usr/tools /
so the building of the tools worked fine. The problem is, and I only realised this after restarting, when I used the chroot line in LFS 6.4
chroot "$LFS" /tools/bin/env -i.
this then looks for /tools/bin/env at the new root, ie /mnt/lfs/tools/bin/env, which didn't exist because it was at /mnt/lfs/usr/tools/bin/env. I could have just added a new symlink, eg ln -sv $LFS/usr/tools $LFS/ but too late now.
Anyway, hope this helps because although RTFM should be every LFS attemptees mantra, it doesn't always help.