Ok+On -> Flash/Update does only that, flashes a new rom to update the rom.
The debian arm distro won't be recognised as a rom image so nothing will happen if you try it.
The rom image is a jffs2 image of the sharp filesystem, if you packaged the debian arm up as a jffs2 image and got the sizes correct then it would probably flash - like the pdaX rom does, but you would of course lose all the qtopia stuff.
If you want a full linux system with X then have a look at the pdaX rom as they have done most of the hard work for you.
Stu