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I don't have a One, so specific help is unavailable from here. But i've toyed a bit with an eeePC, and perhaps there are similarities?
Getting the eee to boot off of an usb-stick requires me to press ESC during restart and select the stick. The stick must be prepared using ASUS' prepping-program supplied on CD.
How did you prepare your USB-stick? I ask because it seems the usb-stick-housed boot-routine can't find rd-base.img.bzip2, indicating some sort of mishap around the usb-stick-filesystem structure or mounting.
I'd redo the usb-stick-creation, adhering closely to the manual. Perhaps the stick needs to be preformatted to FAT32? Larger than 4GB?
With the eee, actually I didn't need to prepare any usb-sticks at all, because returning it to factory simply requires hitting F9 on reboot to trigger built-in recovery procedure. I don't know if this is specific for the 701SD, but it sure is clever! Have you looked through your manual for something similar? I did NOT expect this to be possible, but there it was, taking me by surprise
Absolute-beginner-proof return-to-factory in 5 minutes flat!
On the subject of "stop playing with what you don't understand!" - no, please continue... But expect to be challenged
And do visit www.tldp.org
, where howtos and guides are waiting for you to read and learn from!
And no, don't install Ubuntu or anything yet! Wait until you've found out that you want more than Linpus offers. Because there IS more to be found. Your One is a fullblown PC, it's thus capable of executing anything designed for x86-CPU's. But not now! Wait, experiment with the One and Linpus, getting a good feel for how it works and what it offers. Then, when you find that there are apps you want to get at, but can't with Linpus, think about moving on. If you don't miss anything on your One - be happy