I likewise have been struggling with getting the fun_plug install to run. Reformatted from RAID1 to Standard, tried ext2 instead of ext3, physically swapped drives, put software on both drives, verified repeatedly that names and downloads were correct. Finally decided to put down the MacBook and work on the Windows XP machine ... and behold, I discovered my Mac was putting those stupid 'resource fork' files in the DNS-321, which begin with a dot and presumably Linux was interpreting them as hidden files and trying to execute them. Maybe? Anyway, I started from scratch using Windows, and it worked on the first try.
Still don't have telnet connection, but at least fun_plug is running!