It gives an error when using squashfs. If you change line 90 of default-runscript.sh from: mksquashfs -noappend "${clst_chroot_path}" "${clst_cdroot_path}/livecd.squashfs" || die "mksquashfs failed, did you emerge squashfs?" to: mksquashfs "${clst_chroot_path}" "${clst_cdroot_path}/livecd.squashfs" -noappend || die "mksquashfs failed, did you emerge squashfs-utils?" then everything will work properly.
fixed in cvs