I think I found the problem.
My node script does a number of things, but the simple basic operation here was not working:
var request = require('request');
var fs = require('fs');
When I removed lines 1 and 2 it would work.
So it is not a problem of calling node.js.
I tried installing request module globally (npm install request -g) but it doesnt fix it.
Then I tried installing request module in the root folder (cd / ) + (npm install request)
That made it work.
system ("node /home/root/myscript.js");
I am using the 159.devkit version.