One thing I would do is to make sure to keep both the vmlinuz image and the initrd image in the same location. You can put them anywhere you want, but common convention is to keep both in the /boot directory. I would start there.
Secondly, to do a bit more diagnostic work, you can use the e and c commands in GRUB to edit your entry and to enter GRUB command line mode, respectively.
In GRUB edit mode, what you could try is to call up GRUB and instead of booting with the entry and getting the file error message, instead use e and edit the entry. Scroll to the kernel line, type e, Enter, then remove part of the file spec for the kernel image and use the Tab key to search for what is actually out there.
Do the same thing with the initrd image.
Also, in your ls command examples, it was difficult to figure out which directory you were in at the time you verified the presence of the kernel and the init file. Hunt around in the directories, either with ls or grub and you may find that things are not located where you thought they were. That is the most likely scenario without actually having access to your system. Using ls and the GRUB e and c commands judiciously ought to help you discover which entries are not matching up and to get that resolved. Once you are there, you are home free.
Good luck finding out where the real problem lies. Let us know what you find out.
Last edited by masinick; 11-10-2007 at 06:54 PM.