[makkonen]

hamagc: make sure you're doing everything as root. make sure you're using the right version of squashfs -- I think it won't extract if you're not. You can also try this to build it:

sudo unsquashfs system.sqsh
#make changes
sudo mv ./squashfs-root ./system
sudo genext2fs -d ./system -b 100000 -a system.ext2
mkdir ext2mount
sudo mount -o loop ./system.ext2 ./ext2mount
sudo mksquashfs ./ext2mount newsystem.sqsh