Ok, I've done it. The secret was, as in so many places on these forums, that my power supplies (cellphone chargers) just weren't giving enough power for the portable hard drive. I had 3, one powering the Pi, one powering the USB hub, and one powering the hard drive through a split cable. Not good enough.
Then I tried using my laptop USB port as an additional power supply for the hard disk, and all was well. So, the steps are -
1) find a way to get enough power to the USB hard drive
2) write the squeeze image to both hard drive and to your SD card
3) on the small partition of the SD card, modify cmdline.txt as described above
4) on the small partition of the SD card, replace kernel.img with the one from github as above
5) plug it all in and off you go!
It's hugely faster, feels more like a real (very old) computer. Good luck