Ok, to an extent you are right, if you were putting X2 on your chip prior to March. (think that's when the first X2CLs hit.) I don't think I've used FlashBIOS in almost two years so I'm not up with the new features. As far as building a 1MB file goes I'd recommend some changes.
First, get the latest X2CL BIOS. If you don't know how to obtain the file (no one here that's in their right mind will email it to you) look around for posts regarding the xbins FTP. Xecuter (or the team) even put together a tight package that will automate most of the process for you, I think a search for xbins auto tool will find it. When you get the package there will be two bin files, an ini and some important documentation. Take the time to read this and try and get familar with the options in the BIOS, you'll thank yourself later.
For the second step we'll build a 1MB BIOS pack that you can then flash to your chip. I have read that it is possible to flash only a 512KB file, but since I have not tried this myself I'll continue on with the tried and true 1MB method. It sounds like you've got yourself a 1.5 or earlier xbox since you can see both FlashBIOS versions and you did not report any problems. Make sure you use the X2CL BIOS that is right for your box. There is one bin for 1.0-1.5 xboxes and one for 1.6 units. Likewise with FlashBIOS, I understand the 3.01 version is more stable than 3.03 on 1.0-1.5 boxes and 3.03 is the FlashBIOS of choice for 1.6'es. Load these up in X2 BIOS Manager. Drop the X2CL BIOS in 1 and 2 (the one file will cover both) and a copy of FlashBIOS in both 3 and 4. You're loading 3 BIOS files to make the 1MB image: 512KB + 256KB + 256KB = 1MB. You can swap it and do FlashBIOS first, then X2CL but this is how by chip is currently configured, with X2CL first. Just remember that the 512KB marker is the separation between bank 1 and bank 2 on the X2 switch bank.
You've now got your 1MB BIOS file ready to flash. Once flashed (http, disk, you choose) if you boot from bank 1 you will see the X2 rox my box logo and then go to the MS dash. Boot on bank 2 and you'll see FlashBIOS. From here you will need a boot disk that you can load from the X2 boot so you can FTP into your box and setup a dashboard, plus drop off the all important x2config.ini file. Tutorials on the boot disk can be found elsewhere like xbox-scene.com.
-Whoopin'