Hello,
I have observed the following symptoms when booting a vanilla 2.6.25.10 kernel with an initramfs (created with `mkinitramfs -o /boot/initrd.img-2.6.25.10 2.6.25.10') on an etch (on a PC).
...
mount: Mounting /dev on /root/dev failed: Invalid argument
...
run-init: nuking initramfs contents: Directory not empty
The last error causes the end of the boot process with a kernel panic.
I found several messages on the internet (especially on Ubuntu forums) describing the same symptoms.
I ended up adding traces to run-init from the klibc 1.4.34 package. This showed there was a problem when trying to remove /dev/.static/dev/.
It appears that scripts/init-bottom/udev executes
mount -n -o bind /root/dev /dev/.static/dev
This is most likely the immediate cause for the run-init failure to remove this directory, which in turn causes the kernel panic.
I do not know if this is actually related to the version of the kernel. I do not know the fundamental issue. As a consequence, the following solution is probably more of a hack than a real fix. However, some people might find it useful.
You can try to prevent scripts/init-bottom/udev from executing the problematic mount command by changing a configuration option the following way: