I haven't used the installer, so I'm not sure what's going on with your current configuration. But nobody's answered you yet so here's a low quality response on how to .tar.gz a root folder.
In general if you're trying to archive a filesystem with tar, what you want to do is something like
tar -cX my_rootfs.tar.gz / | gzip -c > ./my_rootfs.tar.gz
The "X my_rootfs.tar.gz" part is an exclude filter to avoid trouble when tar encounters the ultimate my_rootfs.tar.gz file that gzip is streaming to the disk within the same process. It's just to be safe; I'm not sure if that's an issue or not.
Keep in mind tar isn't really good for this because it doesn't include the /dev directory. I don't know if that's a problem for what you're trying to do. Maybe you haven't messed with it at this point.
If you're into cloning plugs and don't mind spending a few bucks extra per plug (plus having something sticking out of it), a better approach is probably just to buy an SD card for each plug, copy your root folder from the NAND into each SD card, and then have all of them boot from the SD. You'd basically be following the first half of the instructions in this FAQ:http://www.openplug.org/plugwiki/index.php/SD_Card_As_Root_File_System#Create_a_bootable_file_system_on_the_SD_card
On the source plug (after messing around in the NAND filesystem as needed) you would mount the SD as /dev/sda1 and copy your root filesystem recursively starting with / from the NAND into the mount point, using cp -ax. Then copy the /dev folder (without the -x argument) to the mount point. Unplug, pop out the SD card, put a new one back in, plug, fdisk (using ext2), mkdir, mkfs, mount, cp -ax, cp -a, repeat. Pump out as many SD cards as you need for all your plugs.
Now you've got to have them all boot off the SD cards, maybe including your source plug if you have an SD for it, so follow the second batch of instructions:http://www.openplug.org/plugwiki/index.php/SD_Card_As_Root_File_System#Booting_from_the_SD_Card
You have to screw with uboot on each plug to prioritize the SD card over the NAND when booting. Plug your USB into the little slave USB port, run whatever unpleasant USB-serial drivers / terminal stuff you need to on the host system, reboot the card from SSH using shutdown -r now, hit ENTER like it says, and get to the Marvell>> prompt. (Make sure you can do this before buying 10 SD cards off Amazon.) Edit the bootargs variable as described, on each plug, then plug them all in and you've got cloned plugs with filesystems on SD instead of NAND.
Lots of people have trouble with certain cards. I used a Kingston 8GB SDHC