Step 1: Download the image
Download the ext2 image here (52 MB).
Step 2: Copy it to your SD card with DD
dd if=openwrt-olpc-ext2.image of=/dev/sdc
Step 3: Plug and Boot
Via an USB card reader
I put the SD card into an USB card reader and connect it to the XO.
It boots the kernel, but it seems that the kernel fails to find the root partition sda2, maybe the device sda itself:
Via an SD card in the slot
It gives another error if you put the SD card directly in the SD card slot of the XO:
Step 4: Try with the squashfs image
The squashfs image (with USB reader of via the SD card reader) gives the same errors.
Step 5: Report a bug when it does not work
I have submitted a bug report on the dev.openwrt.org system: Ticket #4574 (new defect) Kernel of the OLPC image on SD card does find the root partition on sda2.