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cat rootfs.gz modules.gz > core.gz
mkdir tempdircd tempdirzcat /path/to/existing/rootfs.gz | sudo cpio -i
sudo find . | sudo cpio -o -H newc | gzip > /path/to/new/rootfs.gz
It does appear to do some kind of install, though I can't tell if it also creates all of the symlinks in /bin and /sbin.
I think that script just compiles all of the source packages in that directory.