NAS326 defaults after restart or shutdown

Last command gives sh: flash_eraseall: not found

OK. According to the script in NAS326.zip it's 'flash_erase /dev/mtd2 0 0' on the NAS326. Don't ask.

I won't be able to use RAID1 if I install it on harddisk will I?

Yes, you can. You can install the rootfs on a partition of, let's say 16GB, and create a 2nd partition which, together with an equalsized partition on the other disk is used as raid1 data volume.

Theoretically you can even use the initramfs (uInitrd) to assemble a raid partition containing the root filesystem containing Debian. That is the whole purpose of the initramfs, to contain drivers and tools to bring up the final rootfs.

Linux is very versatile, when it comes to booting. Even with your limited u-boot you can construct bizarre boot constructions. You could let it download a uImage from another server using tftp, then load a uInitrd from a connected usb stick (or the other way around, if you like. Or get one or both from flash. There is plenty of it.) and let the scripts in the initramfs mount an NFS drive on a server in Australia (which is far away from me, but maybe not from you), and use that as rootfs. Or create a raid5 volume from an USB stick, a disk partition, and a network block device from that famous server in Australia, containing your rootfs. (That would perform really poor, of course, but it will work).

Having said that, I remember there were problems to let NAS326 stock u-boot read from harddisk. Some years ago I put Debian on a NAS326, and there was something, but I can't remember the details. Maybe I ended up with uImage and uInitrd on a (small) usb stick, maybe I wrote them to flash, something like this.