Pegxlin doesn't work on the Pegasos II. You have to get the installer form Sven Luther (Debian Installer).

Then boot with this installer: boot di-2004.03.15 devfs=mount mem=256M video=radeon:1024x768@60 (if you've got a radeon videocard)

This Debian installer doesn"t work with the Debian cd's, it's a netinstaller. You must use testing install.
The 'mem=256M' option is only needed if you have more than 256MB in
your Peg.