I can confirm the fix - I formatted a usb stick with EXT3 and the install went as normal and Netflix is working great (as is the desktop agent and hacked flash...)
I used partition wizard home edition 7 to format my usb drive to ext3 and Ext2IFS to write the updateb54202 folder to it. I had to chmod one of the files (putty log isn't long enough to list which).
Result: Netflix works great! Thanks!