HD Install :: Need some help w/ Install

You should try the frugal hd install of DSL also. IT is a little different and it just might work.

Does frugal install mean that image from cd is NOT uncompressed (like in debian-type install) but is copied to hard disk as-is, and than is launched?

Yep!
That is exatly how frugal works. And that is also the recommended way to install DSL.

Some discussion of pros and cons of frugal.
http://damnsmalllinux.org/cgi-bin....;t=5983

original here.