Thank you again Wolfgang, and thank you very much to everybody who was involved in this discussion.
I got everything working. I would like to summarise output of this discussion - it might be useful to somebody else in the future. Please correct me if I am wrong.
_MPC8272ADS_in_low_boot_mode_ (HRCW comming from flash)
(1). Apply patch from Alexandre Bastos (valid for u-boot snapshot from 2 November 2005, thank you Alex)
http://article.gmane.org/gmane.comp.boot-loaders.u-boot/19108
*MPC8272ADS Flash HRCW 0x0E74B20A
(2). Compile 'make MPC8272ADS_lowboot_config'
(3). Since our HRCW 0x0E74B20A (0x74 => ISB100 => IMMR=0xF000_0000) we need to change BDI2000 config file (thank you to Yuli Barcohen)
WM32 0xF0010004 0xFFFFFFC3 ;SYPCR: disable watchdog WM32 0xF00101A8 0x04700000 ;IMMR : internal space @ 0x04700000
*Note I use default 0x04700000 for IMMR since it came like this. Wrong HRCW value may cause board to continuously reset.
(4). Move JP9 in position MEMORY, make sure that SW2 Boot Source is ON (boot from flash)
(5). In BDI2000 config file change
BOOTADDR 0x00000100 ;boot address used for start-up break
(6). Burn software using BDI (thank you to Wolfgang Denk)
8272>load 0 8272>unlock 0xff800000 0x40000 32 8272>erase 0xFF800000 BLOCK 8272>prog 0xFF800000 u-boot.bin BIN
Make sure you use load address when loading to memory
i.e. 8272>load 0
If no load address is given or BOOTADDR different from 0x00000100 you may see message in BDI console
# PPC: timeout while waiting for freeze
(7). (Haven't tried yet). To program blank flash with 8272 ie. on target board without BCSR. (thank you to Jerry Van Baren) --8<-- For blank flash, you need to pull up the RSTCONF* line (8260UM 5.4.2.1 "Single MPC8260 with Default Configuration") which will set your HRCW to all zeros rather than read it from memory (I'm assuming you are not implementing the BCSR).
This will require a different BDI2000 config file because the ISB will be set to 0x0000_0000 - if the first line in your special BDI config file sets the ISB back to your prefered value (0xF000_0000?), you should be able to leave all the rest of your config file the same.
At this point, you should be able to program flash. After programming flash, I go back to normal mode (RSTCONF* pulled low) and _power cycle_ the board. Note that the HRCW is only read on a power cycle, not on a software reset. --8<--