The issue it may be related to is that CWM on boot installed via either method fails to stick past the initial reboot. It looks to me that it is restoring an image on start up each time undoing any changes. It must not be changing everything because the root sticks. I have made sure init.d support has been installed. The phone is an AT&T branded MB865, has been rooted and is running stock 2.3.6 firmware.
Any pointers will be appreciated and I come from an embedded Linux background so I'm willing to help out, but why re-invent the wheel if this has already been solved.