[Nexus One Android Development] djmcnz:
Sorry it took so long to come back to this guys...

Yes the problem is apps2ext related. What's happening is that apps2ext is running, even though you don't have an ext partition. It's actually checking for it, not finding it but proceeding anyway. It tries to copy /data/app to /system/sd/app and fails (because the destination doesn't exist) but then it proceeds to delete /data/app (!) - it does this for app-private too.

RC1 of apps2ext which is being used should exit under this condition (when it doesn't find sd-ext). I'm not sure why it doesn't. Perhaps if Rod gave the following (abridged) log to trikton to look at it might assist with diagnosis.

I//system/xbin/run-parts( 62): [ ] Ext partition found.
I//system/xbin/run-parts( 62): [ ] Checking Ext partition...
I//system/xbin/run-parts( 62): e2fsck 1.41.6 (30-May-2009)
I//system/xbin/run-parts( 62): ext2fs_check_if_mount: Can't check if filesystem is mounted due to missing mtab file while determining whether /dev/block/mmcblk0p2 is mounted.
I//system/xbin/run-parts( 62): /system/bin/e2fsck: No such device or address while trying to open /dev/block/mmcblk0p2
I//system/xbin/run-parts( 62): Possibly non-existent or swap device?
I//system/xbin/run-parts( 62): [ ] Mounting ext partitions...
I//system/xbin/run-parts( 62): mount: mounting /dev/block/mmcblk0p2 on /system/sd failed: No such device or address
I//system/xbin/run-parts( 62): [ ] Searching for App directory on ext partition
I//system/xbin/run-parts( 62): [ ] App directory not found, creating...
I//system/xbin/run-parts( 62): mkdir: cannot create directory '/system/sd/app': Read-only file system
I//system/xbin/run-parts( 62): [ ] Changing permissions of /system/sd/app
I//system/xbin/run-parts( 62): chmod: /system/sd/app: No such file or directory
I//system/xbin/run-parts( 62): [ ] Copying files from /data/app to /system/sd/app
I//system/xbin/run-parts( 62): cp: cannot create '/system/sd/app/NetMeterLED.apk': No such file or directory
more of these...
I//system/xbin/run-parts( 62): ls: /system/sd/app: No such file or directory
I//system/xbin/run-parts( 62): [ ] Deleting /data/app
I//system/xbin/run-parts( 62): [!] Creating Symbolic Link of /system/sd/app as /data/app
I//system/xbin/run-parts( 62): [!] Changing permissions of /data/app
I//system/xbin/run-parts( 62): chmod: /data/app: No such file or directory
I//system/xbin/run-parts( 62): [ ] Searching for Private Apps directory on ext partition
I//system/xbin/run-parts( 62): [ ] Private Apps directory not found, creating...
I//system/xbin/run-parts( 62): mkdir: cannot create directory '/system/sd/app-private': Read-only file system
I//system/xbin/run-parts( 62): [ ] Changing permissions of /system/sd/app-private
I//system/xbin/run-parts( 62): chmod: /system/sd/app-private: No such file or directory
I//system/xbin/run-parts( 62): [ ] Copying files from /data/app to /system/sd/app-private
I//system/xbin/run-parts( 62): cp: cannot stat '/data/app-private/*': No such file or directory
I//system/xbin/run-parts( 62): ls: /system/sd/app-private: No such file or directory
I//system/xbin/run-parts( 62): [ ] Deleting /data/app-private

I think it should be a quick fix...