I have this link in my / directory:

david:/# ls -l vmlinuz
lrwxrwxrwx 1 root root 25 Apr 6 15:16 vmlinuz -> boot/vmlinuz-2.4.18-bf2.4

However, in my /boot/grub/menu.lst, I have the following entries:

title Debian GNU/Linux, kernel 2.4.18-bf2.4
root (hd0,2)
kernel /boot/vmlinuz-2.4.18-bf2.4 root=/dev/hda3 ro
savedefault
boot

title Debian GNU/Linux, kernel 2.4.18-bf2.4 (recovery mode)
root (hd0,2)
kernel /boot/vmlinuz-2.4.18-bf2.4 root=/dev/hda3 ro single
savedefault
boot

How purpose does /vmlinuz have since it is not referred to in the /boot/grub/menu.lst?

Maybe LILO needs it?

Mines often been wrong (Switching between kernels etc.) and I've suffered no ill because of it. There maybe some programs, or configs that require the link, but I don't think so.

Mainly, its just for ease of adressing. When you do the links, you can change the kernel much easier.

what about calling your new kernel image vmlinuz-2.X and check if it doesn't not upgrade the menu lst ...

I sorta left some info out. The way that debian uses kernels is that it makes them into installable .debs using kernel-package (make-kpkg) . the vmlinuz is just the way that the scripts install the kernel. I suppose, you could change it manually, but it needlesssly complicates the process.

I had this the other night when I was trying to upgrade something (didn't work in the end, ).
But, in my lilo.conf it has the line
image=/vmlinuz

so its used by lilo to find the kernel.