Menu option 'I' inits partition table and formats USB storage.
I was curious if uboot wants to load mmc0 as it says, or mmcblk0p1. Should the image it wants to load from USB contain the partition table? Also, does it want to see some kind of header info in that image file?
I would think it wants to load whatever format is saved from the menu. Perhaps you can try loading an image created from uboot on a different kindle touch. Not knowing what uboot does, it would be interesting to see if it can restore the backup IF it sees a correct image, or if it really does not even SEE that you pressed '3'.
Why bother putting option '3' there if it does not work? That is in the uboot program stored in a a small i2c or spi memory device AFAIK.
Do we have the source code for the uboot version in the kindle touch? There are too many questions and possibilities without analyzing uboot to narrow it down. Perhaps the device containing uboot can be read and written, allowing patches to uboot so you can restore your backup image to the mmc device.
EDIT: Or just use JTAG. JTAG hacking with linux (read the comments there too):
http://hackaday.com/2010/06/01/jtag-...ver-a-network/
or this:
http://goodfet.sourceforge.net/