I've experienced similar problems from IDE drives when installing LILO to the root partition. One possibility that I could think of is to install LILO to the MBR of the USB drive, at least this has worked for me on IDE devices. It should be similar in most cases. If you were able to boot from a bootdisk, then this would appear to be part of the problem. As for why you are receiving a kernel panic, the only suggestion that I could make would be an incorrect and/or missing setting from the compiled kernel.
Last edited by swampdog2002; 09-21-2006 at 02:38 PM.