Ok, so i got that straightened out on the RT-AC68U, but I'm still stuck on the RT-N66U. (56_2)
Basically what happens is that it'll create a temp file in /mnt/sda1/hosts/ and that file will contain the list like it should, but about half the time it'll stop. Running ./update-hosts.sh will just become unresponsive 50% of the time, and never create hosts.blocked. However, when it does 'complete' and creates the hosts.blocked file and deletes the temp, the hosts.blocked file will be empty.
I've tried using three different usb drives, I've tried plugging them into different ports, I've tried deleting the update-hosts.sh file and re-copying it. Nothing I do seems to work.
edit: ok, so, had a blank line at the end of whitelist.txt and blacklist.txt. removing those and rebooting fixed it.