You need to have a micro sd card installed to flash most custom roms b/c many apps need the card for storage. A 4 gb card will do, but I prefer a 16 gb. (32 gb is the max that will work.) If you're purchasing a sd card, pick up a cheap 2 gb...
[Guide] How to install CM7 on your Nook Color
[Guide] How to install CM7 on your Nook Color