Boot fails with "Can not mount .. /live/image/live/filesystem.squashfs on //filesystem.squashfs"

[Chris Jones <cjns1989@gmail.com>]

I have a feeling that this means that my binary.iso does not have
support for squashfs filesystems enabled.

I have installed the squashfs-modules-2.6.24 .. and squashfs-tools
packages on my host system but I'm not sure what I need to do to ensure
lh-build finds them.

Is it just a matter of copying them to the chroot_local_packages
directory?

Or do I need a patched kernel to enable this feature?

And if so, what would be a reliable source for patches or better an
already patched kernel source .deb?

Thanks!

CJ