1.Update key stuffs described in Changes in $SRC/Documents.
The following is very important:
Name: Minimum version: How to find version:
Gnu C Compiler 2.95.3 gcc --version
Gnu Make 3.78 make --version
binutils 2.12 ld -v
util-linux 2.10o fdformat --version
module-init-tools 0.9.9 depmod -V
procps 2.0.9 ps --version
[procps 2.x] [procps 3.x]
Additional, you also need to get the newer mkinitrd tools which is needed for "make install".
What i am using is:
mkinitrd-4.1.9-1.src.rpm
module-init-tools-3.0.tar.gz
procps-3.2.3.tar.gz

2.compile kernel
make menuconfig
make
make install
Note:Currently, it seems that there are some problem during upgrading in vmware.

3.After compiling, serveral things need to be done.
a)because the /proc/ksyms don't exist in kernel2.6, you need to patch /etc/rc.sysinit to insert /sbin/modprobe into /proc/sys/kernel/modprobe instead of /bin/true.
b)for rpm tools usable, you need to set workaround "export LD_ASSUME_KERNEL=2.2.5"
c)Hotplug:
To have this working, you'll need to edit /etc/rc.sysinit Replace all occurances of /proc/ksyms with /proc/kallsyms
d)SysFS:
To have SysFS working, you'll need to do five things:
1. Create /sys
2. Edit /etc/rc.sysinit (yes, again!)
You'll need to add mount -f /sys on the line underneath mount -f /proc
After action $"Mounting proc filesystem: " mount -n -t proc /proc /proc add:
action $"Mounting sysfs filesystem: " mount -n -t sysfs /sys /sys to /etc/rc.sysinit
3. Do: echo "none /sys sysfs defaults 0 0" >> /etc/fstab
4. Find the function halt_get_remaining in /etc/init.d/halt, and change
awk '$2 ~ /^\/$|^\/proc|^\/dev/{next}
into
awk '$2 ~ /^\/$|^\/proc|^\/sys|^\/dev/{next}

Reference:
http://kerneltrap.org/node/view/799?from=35&comments_per_page=35
http://www.fearthecow.net/index.pl?section=guest&page=kernel