We (www.freetz.org) are using squashfs to unpack and pack firmware images for dsl routers (from a German company called AVM).
Although I couldn't find anything in the changelog the handling of hardlinks and some other types changed from 3.3 to 3.4.
Actually we are using squashfs-3.3 which works perfect but with 3.4 we get some errors:

create_inode: could not create character device squashfs-root/dev/console, because you're not superuser!
create_inode: failed to create hardlink, because Bad address
create_inode: failed to create hardlink, because No such file or directory

And unsquashfs closes with a segmentation fault. We are doing unsquashfs in a fakeroot environment. Is there a switch to change this behaviour or can you give me a hint how to create soft-links instead of trying to creat a hard-links?