I'd bet mounting the root fs has to do with the initrd, not the kernel. Anyway, maybe the knoppix kernel will work out well. They also have some good guides that apply to live cd mastering on their site. Also check out mkinitrd-cd.
Code:
frye0031@sunfryes.com:~$ apt-cache show mkinitrd-cd
Package: mkinitrd-cd
Priority: extra
Section: admin
Installed-Size: 1556
Maintainer: Rene Mayrhofer <rene.mayrhofer@gibraltar.at>
Architecture: i386
Source: gibraltar-bootcd
Version: 0.40
Depends: libuclibc0 (>= 0.9.17-1), dosfstools, mtools, syslinux (>= 2.00-1),
makedev, gcc, make, discover-data, uclibc-toolchain (>= 0.9.26-1),
libuclibc-dev (>= 0.9.26-1)
Recommends: mkisofs
Filename: pool/main/g/gibraltar-bootcd/mkinitrd-cd_0.40_i386.deb
Size: 1278262
MD5sum: cc8f6eb7f54641d2aeaf5959f13093e8
Description: Creates an initrd image for booting from a live CD-ROM or USB device
This is the package used by the Gibraltar project to create the initrd images
used for booting from CD-ROM or USB sticks. The bootable CD-ROMs or USB
mass storage devices are actual live CD-ROMs respective live filesystems.
That is, the root file system is the CD-ROM or an image on the USB device,
ramdisks are the only things needed for operation without a hard disk.
Although a harddisk can be used for e.g. storing log files permanently or
when the machine acts as a proxy server.
.
Given a kernel image and the corresponding modules, it creates a complete
boot image that can be written to floppy or be used as El Torito image for
a bootable CD-ROM. Additionally, it is possible to create an initrd image to
be used on a USB stick (e.g. with syslinux). Upon bootup, the initrd image
will try to locate an ATAPI CD-ROM drive or a USB mass storage device. When
this does not succeed, it auto-probes for SCSI adapters and tries to locate
SCSI drives. It also works when multiple CD-ROM drives are installed in the
system by checking if the inserted CD is the correct one for booting.
.
The package can be of use to developers and packagers who want to create
their own bootable, live Debian CD-ROM or bootable, live Debian USB stick.
It will probably not be of any use to others.