PhaseBurn
It's not possible to do a stage 1 install with out internet... the only way to do an internetless install is via stage3, which includes a full portage snapshot...
the reason it isn't using your sources are because the script doesn't even check distfiles for them... You can hack the hell out of the script to do so, or just use stage 3 (my recommendation)...
Stage 1 is only really good IMO for people who need to squeeze every possible bit of performance out of their machines, or, those who want to learn a lot about how the system is built. It's not something I do when building production/text boxes, with out a damn good reason...
Just my 2 cents...
I wasn't aware that stage 1 required the internet. Bah, oh well, I downloaded all the sources anyway, despite the pain. I'm doing the stage 1 for several reasons. The main reason is, as you said, to learn more about how Gentoo works. I've learned quite a bit so far, so it was not a waste. The other is, of course, to have a system built from source completely. Achieving the highest performance out of my system is another objective. And lastly, though the least important out of all of them, is the pride. Yes, it sounds rather dumb, but it's the small things in life that keep me going. Like walking 18 miles to six flags on no sleep.