The current firmwares only come with a few loop devices, so if you want to use more than 6 applications you need more. disco, author of the webserver app, supplies a how to and fix in his blog at http://discowd.wordpress.com/2009/05/14/extra-loop-devices/trackback/.
The application binary does not work, to use it you must persist the content of the app.bin somewhere in your root filesystem.