It seems that the update process in the README is really out of date
(it refers to scala-2.8 and chisel-1.1). I've updated it to what I
believe to be correct, which now just consists of pulling the Chisel
submodule.
Note that I tried this myself, but when I did it I also ran an "sbt
package" in the Chisel submodule top-level directory (there's no "sbt"
directory in there any more). I believe it's not necessary to run
"sbt package", but I really know nothing about SBT...
I made a clean checkout of reference-chip yesterday and wasn't able to
build the debug emulator without first having built the non-debug
emulator. I just added a note to the README to say this.