There are a gazillion "how to roll your own" and even "roll your own" distros.
After looking through an awful lot of pretty awfully written docs, what I can recommend is:
1. Read about the Linux boot process, from bootloader to initrd (if any), to the startup scripts, inittab, and getty.
2. Read about how to make a bootable CD using 'isolinux'
3. Take a Debian installer CD iso (very instructive for this purpose) and tear it apart:
(it may be convenient to use 'sudo' at many point in the process)
a. mount the iso using a 'loop' device
b. inspect the contents of the top directory - try to remember what you learned in (2) and see what you recognize. Poke around and see if there are other important bits that you forgot. There may be invisible files/directories (like .disk/)
c. mount the 'initrd' image and tear it apart - the Debian installer typically has 2 initrds - look at the isolinux.cfg file to see what's available on the disk (or use 'find')
Perhaps the most important thing on that initrd image is the "init" script - in this case a bash script - read through and try to understand what it is doing. The short answer is that it initializes the system, then switches to the final root partition, and executes the final 'init' program (usually a precompiled binary) which will then go through and process the rcS.d scripts (startup) as well as inittab (but I can't remember the order).
Have fun.
PS: I've spent a lot of time on LFS and it has its uses, but I wouldn't recommend it over what I've described here because some very important parts are magically skipped over and you will end up just running someone else's scripts and not really understand what you're doing. Be patient with Google and find good articles on the Linux boot process and on booting from CD. Also, it's far easier to roll your own distro basing it on another distro - Debian seems to be one of the most popular for this purpose (Knoppix, (K,X)Ubuntu, Mepis, etc etc etc).
