Does your router report that it has 128mb of RAM? i.e. from the
webinterface or from command line (i.e. free or /proc/memstat). I
think that I have tried the similar images with no success. In my case
it required the wndr3800 image, i.e.
http://huchra.bufferbloat.net/~cero1/rc7-smoketests/rc7-smoketest8/openwrt-ar71xx-generic-wndr3800-squashfs-factory.img