I just received this resopnse from Bookeen:
RE: Black, gray, & white checkerboard
From: Bookeen Support (email@example.com)
Sent: Fri 5/23/08 2:28 PM
The possibility of upgrading the device without using a SD card has been highly requested by the Cybook's usuers.
Our dev team is working on this point and it should be available in a coming firmware upgrade.
Bookeen Support Team