hm, so you downloaded the latest nightly build of nightlies.mt-daapd.org and installed it in telnet via ipkg install xxxyyyyy.ipk ?
Anyway, you have to get used a little to telnet and the linux console in order to set up the mt-daapd. Once the music dir is set, you can use the WEB interface (ip of your NSLU2):3869 to change the config variables.
Although AFAIK not all values are supported via there yet.