Another update (edited into OP): If you insert the CM7 SD after the NC has started booting from eMMC, but before the stock OS loads (for instance on the blinding white "Nook Color" splash screen), the NC will load up the SD boot partition as storage. You can then connect the NC to your PC over USB, and while you may have to eject and try again, or even unistall from device manager and rescan, the PC should eventually read both the NC and the boot partition of the SD as storage. From there, you can drop in any update package you like, disconnect, and boot by method #2 above.
I had no luck inserting the SD card after the stock OS was loaded: it would read it only as "ready to remove."
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