Is your / (or /boot) filesystem ext2, ext3 or reiser, or what? I seem to recall that I had problems like this when I re-did my kernel and didn't remember to either supply an initrd or enable other filesystem mounting in the kernel.
If you can, boot from your CD (into rescue mode) and mount the partition(s). Edit your lilo.conf file and check to see if that's all OK (look for the initrd bits).
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