Well it appears /hp doesn't exist and subsequently /hp/start some process fails to start and I'd imagine it is because you're missing an entire directory in your root filesystem. Did you follow the exact instructions word for word, syllable for syllable? That message makes me want to think you didn't put files where they were supposed to be put. I'm not 100% sure on the procedure for Nano's though. Maybe you should post in the forums on the project page (ipodlinux.org). Or else you may want to reload the native OS and factory settings and start over. Your best option however would be to find a suitable Linux Live CD (if you don't want to keep Linux) or a distro (Gentoo is a good one for these kinds of projects) and just build the entire kernel yourself.