UPDATE: Great news! rastik has successfully debricked his kindle touch by using yifanlu's fastboot tool. You can read more about the details later in this thread.
Welcome to the Kindle Touch Brick Owner's Club! It has a rapidly growing membership. Fortunately, many of us have successfully debricked our Touch. I believe that I was the first, using the serial port method that I documented during my "adventure", but now there is a MUCH simpler way that does not require opening your kindle. See below for details.
You probably have a script that is loop mounting a file during boot. The touch has serious problems with having the GUI framework and a loop mount both running at the same time.
This has caused bricks.
The reason why the USB Drive disappears after 10 seconds that you booted unsuccessfully too many times and it halts in "repair needed" mode (even if you cannot see that screen) to prevent infinite reboot loops (ending only when the battery is severely depleted).
I fixed mine with a serial cable, but you can now repair it with the tar bug documented in the wiki.
You can make changes to the USB Drive during that 10 second window, including installing a tar bug payload. This payload can replace a damaged startup script with a good one. If you added a bad script (one that mounts a loop device), you can replace that script with a version that does NOT mount the loop device.
If you do not know what script to replace, the tar bug also looks for a script to run on the USB Drive (see the wiki). That script can put a directory listing of the startup directory on the USB Drive, and can copy scripts from the startup folder to the USB Drive, for later copying to the host PC during the 10 second reboot window. Use the startup script to gather information to create a tar payload to repair the damage. This payload can also enable SSH over wifi (iptables) and can reset the boot counter so it will not halt in 10 seconds.
If you cannot make this work, I have a jailbreak exploit that we have been saving, which has no shared dependencies with the published tar expoit, and which can run a repair script even if the root partition is severely damaged, on both the Touch and on the K4NT. Like the tar bug, it too can reset the boot counter, and can enable SSH over wifi. It can install the merged developer keystore as well (i.e. Touch jailbreak). It can also copy missing files from the diagnostics partition to enable SSH (i.e. K4NT jailbreak). Of course, you can do those things with the published tar exploit as well.
Last edited by geekmaster; 01-11-2012 at 12:31 PM.