Newbie trying to build an embedded project using Linux needs help!

First, I must clarify what I mean by "embedded" in my project's context :

-> HARDWARE: I'm doing a project built around a minimalist PC: a motherboard, a RAM module and a USB pendrive. No harddisk, no optical drive, etc... It exchanges data using a USB interface with a piece of hardware I designed myself for radio communications and data acquisition.

-> INTERFACES: the system must run all by itself, with no human action. Just plug it on the wallsocket, let it boot and voilá!, it works. It doesn't even need a keyboard and monitor (although they can be attached for configuration and error messages checking). The main interfaces are Ethernet and USB.

-> SOFTWARE: The PC will run an application I wrote in order to interact via USB with my additional hardware and via ethernet with a remote computer. This application is a command line one. GUI is not mandatory for the final version, but is nice to have one at least during development time.

-> WHAT I NEED: I need a small Linux distro bootable from a USB pendrive. Kernel 2.6 is a must, since I experienced bugs in previous kernels who prevented my application from accessing USB properly. Those bugs were fixed on 2.6 kernel. I must do some configuration in order to boot and run my application directely.

-> WHAT I LACK: I lack knowledge about Linux. This is the first time I'm diving in Linux Wonderland, and I must do a little tweak to the distribution (I'm trying SLAX and I asked the same on their forum too) in order to boot and run my application without human interference. Everything else is (almost) done.

Suggestions welcome!

Anybody?
Help please?