Whenever you want to use a new kernel, I suggest you do it that way:
1. Launch Linux with a usable kernel
2. Install the sources of the new kernel in /usr/src
3. Go to the new kernel source tree. In your case :
4. Put the .config associated to the running kernel in the new tree:
zcat /proc/config.gz > .config
4. In the process, read the help for each option before answering it as needed. This takes some time, but what would be the point in upgrading your kernel if not to use some new feature or driver it includes?
5. Make the kernel image, the modules, install the modules, update your boot loader configuration file accordingly and run it.
To know more about available make options, just type "cd /usr/src/linux-2.6.34-rc5" then "make help".