it has NOT booted up into "unslung" mode from an external drive.
to state the bleedin' obvious, the shell is telling you what's wrong - you're NOT unslung
It's quite a while since I unslung my NSLU2 so I'm not fresh on this, but off the top of my head...
review your process to get unslung. did you follow everything to a T?
Have you definitely entered the correct telnet login/password to get to the shell prompt? I draw your attention to note 9 of the unslinging readme:
9) Verify that you can log into the NSLU2 by going to the web GUI "Manage Telnet" page, enable the telnet service, then telnet in as the root user, with the password you entered when you performed the "unsling" operation.
Remember, you've been playing with a couple different logins/passwords for the various processes to get unslung. Could be as simple as that or
you didn't follow the unslinging instructions verbatim, or your disc setup on the slug is currently not as per when you flashed the firmware....
just a couple of possibilities that spring to mind...
Once you're confirmed to be Unslung, then you can follow the relevant instructions to install mt-daapd/firefly.
I'm sure you have it but http://www.fireflymediaserver.org/index.php
is your main point of reference for firefly. Here for unslung & firefly install also: http://wiki.fireflymediaserver.org/NSLU2_Installation
if you're still stuck on the unslung side of things, really you should post to the NSLU2 help pages (yahoo group I think) but you'll most likely find sympathetic help on the firefly forum as well
hope that helps, andy
G5, OS X 10.5.8, 3 x M1000, iTunes 10.4, slimserver 6.2.1/alienbbc (now redundant), firefly svn 1586, uNSLUng 6.8