Thanks Thane and Curaga For your suggestions and replies
and
Sorry for the delay.(Since I haven't received mails on reply on this thread.)
Yes "Remastering" (under Guides). helped me to de/compress the root file system ...I tried to following things:extracted microcore and put my kernel image and created iso -- it worked -- so no issue with my kernel.Then again, extracted microcore(new one) ,put my rootfs and created iso and so on ..for few days.. and then finally I found the real thing that produces the error , renaming the linuxrc as init worked (stupid me - i should have got it much earlier)
...then finally last week I released that image as
"minili" minimal linux (freshmeat/projects/minili) - experimental educational linux
I really like Tinycore and Microcore ..like microcore bit more ..comes with a plain command line:)
Thanks, once again.