Me too. However I'm looking at this somewhat unrelated how-to: 

http://www.watters.ws/wiki/index.php/How_to_Build_a_CentOS_3_Template

 ...An am inferring that one should replace the give mkfs commands with:

dd if=/dev/zero of=Cent_base.img bs=1024k count=1024
dd if=/dev/zero of=Cent_swap.img bs=1024k count=128
mkfs.ext3 Cent_base.img
mkswap Cent_swap.img

 ...The mkfs.ext3 then says "Cent_base.img is not a block special device. Proceed anyway? (y,n)"  ...to which I say yes.