"It should work on FC3 or later (the pilgrim tools for OLPC that this is based on is running on RHEL4 which is a downstream of FC3) but I haven't tested on anything but FC6 and Rawhide."

     Correct.  It should work.  I'm glad I'm potentially indirectly helping with OLPC with this debug session... :-)  (That is of course if I'm not reaching a hardware limit or overlooking something very simple.)  I'm in the middle of running the tests I mentioned earlier and should have results before 10 EST -- I think.

"The response from kernel people to a _loop device_ experiencing I/O errors was: "cute"."

     Isn't it?

"They suggested your system is either OOM or you're running of disk space / disk quota. Is this the case?"

     A quick sample...

[amd59c@laptop livecd-tools]$ free
             total       used       free     shared    buffers     cached
Mem:        742252     730672      11580          0      67924     336684
-/+ buffers/cache:     326064     416188
Swap:      1534196        300    1533896
[amd59c@laptop livecd-tools]$ free
             total       used       free     shared    buffers     cached
Mem:        742252     730920      11332          0      67940     336748
-/+ buffers/cache:     326232     416020
Swap:      1534196        300    1533896
[amd59c@laptop livecd-tools]$ free
             total       used       free     shared    buffers     cached
Mem:        742252     730920      11332          0      67940     336812
-/+ buffers/cache:     326168     416084
Swap:      1534196        300    1533896
[amd59c@laptop livecd-tools]$ free
             total       used       free     shared    buffers     cached
Mem:        742252     731044      11208          0      67940     336868
-/+ buffers/cache:     326236     416016
Swap:      1534196        300    1533896
[amd59c@laptop livecd-tools]$ free
             total       used       free     shared    buffers     cached
Mem:        742252     731044      11208          0      67944     336932
-/+ buffers/cache:     326168     416084
Swap:      1534196        300    1533896
[amd59c@laptop livecd-tools]$ free
             total       used       free     shared    buffers     cached
Mem:        742252     730096      12156          0      62700     338788
-/+ buffers/cache:     328608     413644
Swap:      1534196        300    1533896
[amd59c@laptop livecd-tools]$ free
             total       used       free     shared    buffers     cached
Mem:        742252     730220      12032          0      62700     338820
-/+ buffers/cache:     328700     413552
Swap:      1534196        300    1533896
[amd59c@laptop livecd-tools]$

     I seem to be hovering around 11-12M free.  I have a total of 756MB physical ram but some is shared with the graphics card.  Here is a quick rundown of diskspace:

[amd59c@laptop livecd-tools]$ df -h
Filesystem            Size  Used Avail Use% Mounted on
/dev/mapper/VG_00-LV_000
                      961M  185M  727M  21% /
/dev/hda1              99M  9.7M   84M  11% /boot
tmpfs                 363M     0  363M   0% /dev/shm
/dev/mapper/VG_00-LV_001
                      1.9G  555M  1.3G  31% /home
/dev/mapper/VG_00-LV_006
                      3.8G  210M  3.4G   6% /opt
/dev/mapper/VG_00-LV_007
                      5.7G  289M  5.1G   6% /sw
/dev/mapper/VG_00-LV_008
                      3.8G   72M  3.6G   2% /swdata/sys
/dev/mapper/VG_00-LV_009
                      2.9G  1.6G  1.2G  59% /swpkg/sys
/dev/mapper/VG_00-LV_002
                      961M   28M  884M   4% /tmp
/dev/mapper/VG_00-LV_004
                      1.9G  591M  1.3G  33% /var
/dev/mapper/VG_00-LV_003
                      6.8G  6.0G  460M  94% /usr
/dev/mapper/VG_00-LV_005
                      3.8G  212M  3.4G   6% /usr/local
/dev/loop0            3.0G   72M  2.9G   3% /var/tmp/livecd-creator/build-tmpIG3wWz/install_root
/dev                  363M  168K  363M   1% /var/tmp/livecd-creator/build-tmpIG3wWz/install_root/dev
/var/tmp/livecd-creator/build-tmpIG3wWz/yum-cache
                      1.9G  591M  1.3G  33% /var/tmp/livecd-creator/build-tmpIG3wWz/install_root/var/cache/yum

     Yes /usr is high, but not to worry...I'm not building from there because the "scratch" is mounted under /var/tmp ...  Unless there is something weird boing on???

I don't have quotas implemented on this system.

"Note that the files backing the loop devices are sparse files so the creation of them works even when you don't have enough free space. The reason for sparse files is that we don't have to spend time writing 4GB of zero's to a file."

   Yup.  You did a good job on design. 

-Adam