Just wanted to add that I too have been successful in flashing my demo Kindle DX(replacement from the infamous bangss, since the first one was broken).
I first used stangri's method in OP but I made the mistake of plugging in usb cable half way through the copying (was worried about battery running low) and got some extra buffer errors, which bricked it.
My last hope was yifanlu's passwordless kernel: http://yifan.lu/2011/04/02/recoverin...rupt-kindle-2/
Using a copy of good old friend HyperTerminal from XP copied to Windows 7 ( I am sure minicom on Linux would work too) I transferred the kernel image to memory (takes about 3 minutes on 115200 =~10kB/s for 1.8MB) and was able to boot and then mount MMCO as USB (option 3 in development menu).
After that it was a simple dd of a rootimg.rfs (which I extracted from a Kindle DX a .bin that is "floating" around the net using yifanlu's KindleTools that I compiled on Linux) from my Lubuntu virtual machine to the usb (i think output was to of=/dev/sdb1 but make sure with df or mount command first, you want the 400MB partition as the destination)
The process was quite slow at around 200kB/s thus taking about 40 minutes for full 400MB, but it worked!
I now have my Demo Kindle DX running 3.2.1.
One small tip, if you have to use u-boot a lot, you should change enviroment settings for boot to 5 seconds instead of 1 second and also you can set the reboot from inactivity to something large like 3600 seconds, so you do not worry about typing too slow.