You may need a initrd= line in your lilo configuration. I use the 2.6 kernel, but if you use the advanced function in MCC / bootloader, you get an initrd line space. Make sure it points to the initrd image file associated with your custom kernel, or you can add a line to /etc/lilo.conf like:
but of course, make sure the initrd image file is the one for your custom kernel, not my initrd-184.108.40.206-10mdk.img file
Also, did you use the kernel-source package from Mandrake, or one from kernel.org. I have had troubles with ones from kernel.org, since they are not 'tweaked' for Mandrake.