I got this crap a few days back, when I installed 2.6.4 from apt-get. I finally decided to just start from scratch and got it to work.
Make the config before you run the following,and substitute /boot26 with whichever directory you have your kernel stuff in.
From /usr/src/linux run:
You should edit lilo.conf,while the kern is compiling, and add a line like the following.
make -j 4 && make -j 4 modules && make -j 4 modules_install && cp System.map /boot26/ && cp arch/i386/boot/bzImage /boot26/ && reboot
Thing is that you are over thinking things, keep it simple stupid.
Good Luck! 8)