Installation :: Install Vanilla Kernel To Other Ubuntu Server?

I am trying to compile a new vanilla kernel on to my Ubuntu server system which has been freshly installed with Ubuntu 10.04 server 32bits. As this will run on a VIA epia-px5000eg mainboard with USB stick I want compile this kernel on a different machine on which is also ubuntu 10.04 installed. Unfortunately currently I experience difficulties when I boot kernel 2.6.34; it says "Kernel panic - not syncing: VFS: unable to mount root fs on unknown block" while if I load to original kernel that comes with Ubuntu 10.04 all works perfectly well. BTW reason I want to build a custom vanilla kernel is to trim down kernel to the necessary services I need as I am running a server that requires just the essentials. And it needs to support the VIA Epia CPU processor family ( C3, C7 or generic setting which is another hurdle which I won't discuss here ).

Hopefully one out there is able to guide me further as I type step by step what I executed. Thanks for your replies in advance:

Yet I hook up the VIA epia-px5000g with 2gb usb stick, a dvd drive and keyboard ( all usb ). Boot from CDrom and install a minimal system (<f4>) to usb stick. Partitioning part I set it to EXT4 and used full size thus no SWAP. Also mount option " noatime " has been set all to save writes to usb stick.
When the base system has been installed a user has been added, as well apt is being configured to install only security updates automatically. As services I want to run definitely openSSH-server so I can access remotely. Grub gets configured and system will be rebooted.

At this stage I configure the network interface to a static address so I do not need to check my router all the time which dhcp address Ubuntu is using if I want to access remotely.

Now the compile part starts, the ubuntu way. I log in to my other system and execute following commands accordingly code...