We hired consultants to upgrade our machines to RH AS3 Update 8. The /etc/redhat-release does say Red Hat Enterprise Linux AS release 3 (Taroon Update 8) however the kernel is still 2.4.21-4. instead of 2.4.21-47. How is that possible ? and how to fix it ?

Are you sure the kernel was not installed??? Could be that when the system was rebooted the old kernel was chosen, check;

rpm -qa 'kernel*'
cat /etc/grub.conf

If you do not have the latest kernel, nothing is stopping you from downloading and installing the kernel from your registered RHN account, for example(see the output from the rpm command above to see which version(s) you need);

up2date -d kernel
rpm -ivh kernel-2.4.21-47.0.1.EL.i686.rpm

Personally I would request that these consultants perform this and any other update if needed at no cost and provide the reason(s) they missed this as part of the upgrade process.

Also, just to mention:

The kernel is excluded from being upgraded by default with up2date on RHEL3 ES/AS.

In order for up2date to update the kernel, you'll need to (or, have your consultants) edit /etc/sysconfig/rhn/up2date to change:
pkgSkipList=kernel*;

to:
pkgSkipList=;

OK. Thanks for all the answers. After I am done with the kernel upgrade , how can I be 100% certain that **everything is update 8 (the library, etc)? afterall in the first attempt (which the consultants screwup - my bos don't want to use them anymore) the /etc/redhat-release did say update 8 but the kernel was not.

do I have to redo all over again (probably it's saver to do that, more work ofcouse but it's ok) and is there a way to upgrade to update 8 without using the GUI ? thanks again.

me again. so this is what I did.
1) put all update 8 rpms in directory /me
2) rpm --rebuilddb
3) for file in `ls`; do
rpm -U $file
done
4) reboot

the kernel now is 2.4..21-47 EL. not quite what I expected. because it only recognizes 1 CPU instead of 4 (the machines has 4 procs). I expect to have 2.4.21-47 ELsmp. What else can I do ?

Install the smp kernel, for example (from CentOS a freely available clone of RHEL) as root;

or;

up2date -d kernel-smp

From where the downloaded kernel-smp package resides;

rpm -ivh kernel-smp*.rpm