A lot of people on the groups page seem to be wanting to update the
/system directory for a bunch of sane (and sometimes insane)
reasons. As they and others have found out, changes to /system
do not persist across reboots. This explains how to get around this.
The easiest way is to make a simple change to the Qemu source. First you download the source from the Android open source page. Then it is a very simple matter of chaning one line:
sprintf(tmp, "system,size=0x4200000,initfile=%s", arg_nand0);
Replace initfile, with simply file:
sprintf(tmp, "system,size=0x4200000,file=%s", arg_nand0);
Recompile and start using your shiny new emulator. Note: You probably want to make a backup of the system.img file so when you hose it you can start fresh.
As far as I can tell there isn't anyway to do this without hacking the code. This is probably easier than trying to get yaffs filesystem generatiogn tools working though.