Did Not Completely Restore, But...
I was able to restore by the following:
1. Tried your method on a rooted (1.00 FW) Touch but it seemed to hang on the last bit of rebooting.
2. I wrote the factory 1.01 update to an SD card using Winimage, turned the Touch off, put the SD Card in, turned the Nook on, let it go to sleep (per BN Instructions for applying update) - it woke up, applied 1.01 and unrooted simultaneously.
3. Reregistered and rerooted using ManualNooter.