Here is what worked for my setup: The SD card requires a primary partition to run from.
I have a 2GB Micro and a 4GB Micro SD card (non hc) and both worked perfectly fine once the partition on the card was set to primary. Originally it was "logical" and the latest bitstream failed every time. Once set to primary, cluster size while formatting was irrelevant--I used default and it worked fine.
Changing from logical to primary does not destroy the contents of the SD card--so if it's already setup, then changing from logical to primary is all you have to do. Using partition magic free edition (windows box), just right click on the micro SD and select change to primary. Then apply.
The order and the name of the files are the same as set out in reply #12.
An entire 2GB or 4GB (non HC) microSD card is bootable and usable--all the microSD cards that I have (about 12 of them from Kingston to the non-name cheap-O chinese knockoffs) work perfectly when set to primary.
I never seen this mentioned so I hope it'll help someone :)