Is internal storage formatting harmful?
Alright, on the forum thread of that specific cusom rom (linked in question), someone said that he re-formatted through Windows with FAT32 as type. So I tried this as well.

While the device was on, I plugged in the USB cable, and put it into lock. Then, as usual, the drives showed up in Windows (SD and Internal that is), and it forced me to format the internal drive in order to acess it. Pressed ok, then formatted with FAT32. After format, I did not even pull the device off the lock, I just quickly pressed the reset button on the back. Then flashed it, and turned it on.

It works perfectly! Now I have Android 2.1 instead of that less-worthy 1.5 build!

Thank you to everyone who proceded help :)