Sometime on Aug 1, Prem D'Souza assembled some asciibets to say:
while booting linux it gives the error "kernal panic" and the system
Doesn't it say anything else with the kernel panic? That message never comes up alone. It may say something like could not find device or something like that.
My guess is that you do not have the vfat partition type compiled into your kernel. You probably have it as a module, which is why it does not work.
Since linux is on a fat32 partition, you need to have vfat compiled in. You can have ext2fs as a module instead.
Philip