In general I recommend Ubuntu, just because that's what we primarily test on. At this point in time I recommend Ubuntu 10.10, although 10.04 and 9.04 should be fine as well. I haven't been able to get 11.04 working yet. I typically also keep the packages on my system up to date via the update manager, but don't think this should really have an impact on ltib.
In the docs portion of our BSP releases you'll find a file called "ltib_build_host_setup.pdf". Follow the instructions contained in this file. It should list the latest packages you need for that BSP release. Below is the relevant portion of a script from this document from the 11.03 release.
As noted in the other thread, likely that you're problem with mtd-utils is caused because you don't have liblzo2-dev or it's Fedora equivalent installed.
#!/bin/bash
# Install packages needed by LTIB
sudo aptitude -y install gettext libgtk2.0-dev rpm bison m4 libfreetype6-dev
sudo aptitude -y install libdbus-glib-1-dev liborbit2-dev intltool
sudo aptitude -y install ccache ncurses-dev zlib1g zlib1g-dev gcc g++ libtool
sudo aptitude -y install uuid-dev liblzo2-dev
sudo aptitude -y install tcl dpkg
# Packages required for 64-bit Ubuntu
# Do "uname -a" and see if the word "x86_64" shows up.
if uname -a|grep -sq 'x86_64'; then
sudo aptitude -y install ia32-libs libc6-dev-i386 lib32z1
fi