Thanks pali and misiak.. I was able to finally get the kernel-power-pali1 installed.
The additional part to be checked is as follows:
1. After installing pali kernel, make sure the owner of the /lib/modules/2.6.28.10pali1 is root. This can be done using chown root:root command
2. Make sure the zImage file is in the /boot folder as well and it is owned by root

Now, I am satisfied with the first step.. cannot wait for more enhancement such as moving to kernel 2.6.37 with libraries