in order to boot from the CD you need some minor kernel modifications. First of all, you have to support the filesystem you boot from (iso9660), and all the pseudo-filesystems (devfs, /dev/pts, proc at least). Of course you need ramdisk support.
CONFIG_PROC_FS=y
CONFIG_DEVFS_FS=y
CONFIG_DEVPTS_FS_XATTR=y
CONFIG_RAMFS=y
CONFIG_BLK_DEV_RAM=y
CONFIG_BLK_DEV_RAM_SIZE=8192
CONFIG_ISO9660_FS=y
CONFIG_JOLIET=y