I upgraded my Kernel to 2.6.8 using official Debian Sarge package and
everything went fine, no problem. Then I decided to compile a
newer kernel version and do some optimisation (compiling
a new kernel is fun you know...). Well, after some errors and
corrections I managed to install and boot succesfully to
2.6.11.10. I was happy awhile but then I noticed that this
newer version was muuuuuch slower that official Debian 2.6.8.
It is impossible to watch for examle dvd because video quality
and audio is so poor (frames are lost etc.)
If I boot to older kernel version, I do not have these problems,
totem plays dvd correctly. So the problem is in kernel that is
how I have made it.

I have studied and studied .config of 2.6.8 and all relevant settings
should be the same in .config for 2.6.11.10 but this performance
problem remains. If I used 2.6.8 .config to make 2.6.11.10, the
kernel didn't boot, so I have had to edit .config that came with 2.6.11.10
release.

Any idea what could be the reason? Do I have to change some
kernel header files (which ones) or what?

Is your 2.6.11 kernel a vanilla kernel or the kernel from Sid?

If you are using a vanilla kernel then you don't have all the patches used in debian's kernels and this is another difference between your 2.6.8 and your 2.6.11 and maybe the cause or part of the cause of the performance problem.

If you are already using the source kernel from Sid or vanilla+patches then I haven't got more suggestions for you.

One of the reasons for a newer kernel making your computer go slow are the hard disk DMA settings. Check these with hdparm and set dma access and 32 bit I/O access on etcetera.

But I could be way off target because I don't use Debian and DMA access is just one of the reasons...