I've noticed something else.
>> 1. Do I create file "rsyncd.conf" similar to yours and place it in /etc/rsyncd.conf
Yes, but you will also need to copy and save this file somewhere on your flash drive.
We recommend /boot/custom/etc
Do both locations of rsyncd.conf suppose to be on flash :
/etc/rsyncd.conf
/boot/custom/etc/rsyncd.conf
because that is what I have.
It seams that rsync is ignoring my rsyncd.conf .