Thanks,
I changed my rc.sysinit, fstab, mtab and halt files according to
http://thomer.com/linux/migrate-to-2.6.html steps.
(sysfs loads right after proc)
also upgraded module-init-tools to ver 3, so modprobe.conf seems to have
the USB controller usb-uhci installed now.
alas, when I reboot, I still get a Fatal error when the system tries to load mouse, keyboard, usb modules. it can't find: /sys/bus/usb/devices
Can anyone help...what else is missing?