I guess the others pointed this out already: the 'remove packages' button removes the rpm-package, but not the installed software. So if Yast indicates the sources installed, they are still there. Try rpm -q kernel-source
on console to verify this.
The problem may be that the kernel has not been 'prepared'. Don't ask me what that means, but it think it could help if you do the following:
zcat /proc/config.gz > .config
Now try to run ./configure again.
EDIT: if you have the latest sources installed, /usr/src/linux should point to /usr/src/linux-2.6.5-7.111.5