Start the Puppy Linux System First, through an USB / DVD to get the Fullest Possible Machine Resources. It is better to avoid Virtual Systems for recreating the SFS File.
1. Copy the .sfs file to an Ext Filesystem with Plenty of Free Space and then Right Click on the .sfs file and choose UExtract
2. This will extract the .sfs file to a folder with extension .extracted Ignore errors and close the UExtract window
3. Add / Modify / Delete Files from the .extracted folder
4. Download the attached dir2sfs.zip file and extract it to a folder
5. Take a Backup of the /sbin/dir2sfs file and then Edit / Copy the downloaded dir2sfs file to /sbin/ and ensure that it has Execute Permission, by right clicking file and choose Properties
6. Right Click the .extracted folder and choose dir2sfs. This will generate a new .sfs file
That's it.
P.S. The dir2sfs file given by me has modified settings like gzip compression (~ 70 MB more), processor count : 1 and memory : 50 % of my laptop's memory. The default values for these settings, in the original script are : xz compression, processor count : use all, memory : 25 % . The modified settings produce less load on the system and prevents crashing on some systems. Steps 4 and 5 can be skipped, if your system tolerates the load given by SFS Creation and does not produce heating or crashing of it. This requires some testing effort.