I finally got past the kernel problems. Basically, it looks like 2.4.34.4 is not happy with zlib_inflate being compiled in to the kernel. The workaround is to have zlib_inflate be a module, and insert the module in initrd before inserting the cloop module.
Once I got past that hurdle, the next problem is that, when the 2.4.34.4 kernel is compiled with devfs support, the modules call devfs routines. Since I don't like devfs; the code was abandoned years ago and the location of devices is different than where they are in newer 2.6 kernels, I have had to recompile all of the modules. They take up a little less space since all the devfs nonsense is not in the modules.
At that point, I was able to boot and run the system. I am very pleased with it. The only final thread I need to wrap up is international keyboard support; looks like I need to add xkbcomp and make sure the directories compiled keymaps go in to is a rewritable directory. I also need to make sure /tmp has 1777 perms.
I'm using the system right now. I haven't tested it yet, but it should be able to, after an hour or two (less time if you have one of those fancy Pentium 4 computers), make an iso image that is only a little over 35megs (about 33mebibytes) in size. Complete with Firefox browser, C compiling environment, *NIX command line environment, and even a couple of small video games.
Anyway, I haven't tested it, but it should compile fine and make an iso image from a stock DeLi 0.7.2 install. If you install the firefox package for deli, the iso image will include firefox.
It's here:
http://www.samiam.org/moof/moam-cd-20070607.tar.bz2 (18 meg tarfile)
