Ok I tried and tried and tried to no victory......
But I went to Wal-Mart this morning and bought the 2GB PNY $10 card.
I flashed the factory fresh RUU which means before the update we had. I setup nothing. Formatted the SD card FAT32 512k blocks.
Installed the drivers that cames with UnRevoked2. (Google hacked drivers)
Booted phone completely up with the card in it.
Turned on USB debug mode and airplane mode.
1.adb shell in cmd to make sure my device was listed, meaning the drivers are working.
2.unplugged USB cable.
3.'adb reboot recovery' in cmd.
4.Volume down + power button.
5.When hboot loads waited 10-20 seconds for the img failed.
6.Start your 'adb shell' loop.
7.Volume down to select recovery in hboot menu. (Continue holding volume down)
8.Press power button to select recovery while holding down and the power button. When pressed count 7-8 seconds and insert the usb cable.
9.Give it till you hear the windows usb disconnect and reconnect sound and let go of the volume down and power button.
If you have the no such directory error you are ready for the rest of the steps of pushing files etc. If you don't fully restart the phone and start again. After purchasing the card and doing these steps I hit it on the second restart. Didn't retry it for fear of it not doing it again since I've already spent countless hours and days working with a mix and match of steps and sd cards.
Good luck! It's all about the timing in pushing in the USB cable and on what memory card you are using. Got UnRevoked installed now and removed CityID,Verizon VVM, and all the other apps I didn't need. Phone is running really nice now. Got all my apps reinstalled and the phone just feels faster.....maybe just placebo but whatever!
Good luck keep trying!
Some helpful links:
Downgrading to before the update -
http://forum.xda-developers.com/showthread.php?t=695825
Apps safe to remove -
http://forum.xda-developers.com/showthread.php?t=710009
More app information -
http://bluraynetworks.com/android/
Once you get rooted don't forget to chmod so root is persistant and once you get UnRevoked installed get into recovery and make a full nandroid backup so if you mosh anything up!