I've updated the Recovery System with a few good suggestions from Johannes plus better support for the Debian install scripts.
The system now uses zcip to handle IP addresses. If will attempt DHCP, and if that fails it will use 169.254.9.17 and if that's already in use, it will get an availble IP address in the 169.254.0.0/255.255.0.0 subnet.
The LED status lights have also changed. The LED will be orange until the init scripts finish. From then, the orange LED will always be a heartbeat (to show you're in the recovery system). When eth0 is up, the green LED will also be on.
I haven't cleaned up inittab yet, so if anyone want to help that's a good place to start. I'm sure there are many other parts of the system that still have room for improvement.
-- Jeff