Linux Folks!!
I was compiling a custom kernel and what has happend is that it created the kernel files vmlinuz* in /boot but fails to create the initrd files.

when i try to create the initial ramdisk it gives me an error that "all your loopback devices are i use"

initially it gave errors for certain modules
What i did was that i installed the drivers for those modules and did
dkms build -m modulename -k kernelname
which went fine but when i did a
dkms install -m modulename -k kernelname
it ran into errors and said failed to create initrd file fo rthat kernel.

Does your current kernel have loopback support compiled in (or as a module) ?
(See the "Block Devices" menu in the kernel configuration).