The image file could be anywhere on the disk but we like to keep it under /boot for sanity
The map file is read for devices, etc. It is important for lilo.
Lilo doesn't actually look at the /usr/src/linux-2.6.10 directory. Once you have a good kernel setup you can delete that. That is only there as a common place to put your kernel files.
Tell me if you got 'er up and running, I am excited!