[Desire Android Development] iroironz:
UPDATED (VERSION xi03) to FIX IT NOT WORKING FOR A FEW PEOPLE - REWROTE HOW IT CREATES DATA2SD FILE. (12/12/2010)

I've attached the signed data2sd flashable zip (addOrMount_data2sd_xi03-signed.zip) that I made for personal use. It automates everything (including creating the virtual ext file syste) - i.e. no need for adb commands. I use a similar setup as you so it should work fine. I modified it from the work of some others (see references at end of post).

The update zip is does two things with data2sd. First, it will setup up data2sd (including automatically created the data2sd virtual file on the 2nd partition of the sdcard (so make sure you have a 2nd partition!). Secondly, if the file already exists, then it will mount the file to /data in recovery (useful if you want to have a nosy in there). It also includes teppic74's excellent fixfstab script as well.

It will only run if there is a second partition on the sd card (can be fat32,ext2/3 or ext4 if your kernel supports ext4), so if you don't have a second partition on the sd card will just do nothing (harmless to have it there).

Requirements:

*clockworkmod recovery. Zip has issues with AmonRa.

*Kernel which supports loop devices! (if you follow the tutorial and it keeps bootlooping, it's likely your kernel : I use one of richardtrip's kernels - "Froyo Kernel V5e 1113Mhz max", see http://xdaforums.com/showthread.php?t=801435&highlight=richard+trip)

*init.d supported ROM

*recent version of busybox installed in /system/xbin (version in teppic's init.d v3 rom is good)

*e2fsck_recvy in /system/bin (teppic74 init.d roms have this)

*2nd parition at end of sd card (can be fat32,ext2/3 or ext4 if kernal supports it). Apparently there are issues with partition sizes greater than 2GB, so the 2nd partition should be <2GB (I use 768MB).

I've done a bunch of testing using teppic74's 2.29.405.2 INIT.D ROM v3.0 and it works well. Recommended procedure below:

1. Make a full titanium backup.

2. MAKE A NANDROID BACKUP! (seriously...)

3. Make sure you have a 2nd partition on the sd card (just like in a2sd, can use same process to create it if you want) - I use an ext2 partition - the script includes forcing fsck checks at boot, but you can use a journalled fs if you're worried.

4. Boot into recovery

5. Recommend you do a WIPE/FACTORY RESET. If you have been using apps2sd then you MUST wipe/factory reset and reinstall a fresh ROM (this is because we need to get rid of any apps2sd scripts in init.d - since this is not compatible with apps2sd). If you have never used any init.d scripts (like apps2sd) then theoretically you should just be able to flash this zip and it should work (as long as you have a 2nd empty parition on the sdcard).

6. Install teppic74's 2.29.405.2 init.d ROM v3.0, and then anything else you usually like (mods, custom boot animations, battery meters etc).

7. IMPORTANT. You must have had at least one successful boot into android before flashing for this to work. This is because we need to create the normal stuff in /data (this zip will copy stuff from here into the data2sd virtual file). I usually boot into the OS right after a ROM install and then get past the inital setup wizard, and then reboot to recovery and THEN install mods (like system tweaks etc).

8. reboot back into recovery.

9. LASTLY, install/flash the attached "addOrMount_data2sd_xi03-signed.zip". If it's working right then it will take a while (5 or so mins) as it's creating the data2sd virtual file on the 2nd parition of the sdcard - just be patient and wait . After it's done, just reboot.

After it's booted, go to "settings->SD & phone storage" and check internal space. It should be as big as the 2nd sd partition that you created (if it isn't then it hasn't worked). If it has worked then restore a titanium backup and enjoy your new "internal" storage size.

If you check in titanium backup or quick system info it will show A2SD storage as 0 and internal storage as however big the 2nd partition is (this is normal).

Give it a go and see if it works for you.

References:

Stood on the shoulders of these giants:

sibere - http://xdaforums.com/showthread.php?t=852219

ownhere - http://xdaforums.com/showthread.php?t=860602

navalynt - http://xdaforums.com/showthread.php?t=861507

UPDATE3: Found the bug that was causing it not to work for people. It now creates the data2sd file when flashing (rather than trying to do it on boot).