No.. The USB stick.
mount /dev/sdc /media
mkdir /media/lib/firmware
cp /lib/firmware/rt2870.bin /media/lib/firmware/rt2870.bin

No. Mount it.

If you want to use an initrd, use tangrs first bootloader script, before USB was working.
I think it was "root=/dev/mem".

Am I missing something ?

Yes, you need the bootscript from tangrs.
You don't give the kernel the parameter "root=/dev/sda" or "root=/dev/sda1".

By the way, the -j option forkbombed my pc. I recommand to use -j8 instead.

Really? It runs fine for me, if I run it on tty1.

It's probably a good idea to take a look at this. I'm not sure if this will work, but this will certainly help you get a working ARM compiler on your Linux box.

Yes, I used this script and it works fine for compiling the kernel.

does it means its working and i dont have wifi? or does it means that it still doesnt recognize my dongle?

It can't find the firmware. You need to find it and put it in the right directory on your usb-stick.

Yes, it should.
Link: http://dl.dropbox.com/u/105478372/zImage.tns
Hm, I override my other zImage on dropbox, I hope it does still work..

Edit:
"apt-get install gcc binutils" should work.

But why did you post it here?
PS: Read your error messages..

Install ncurses (ncurses-devel) and try again.

Minecraft has now been ported to the raspberry pi!
If we can get mesa software-rendering running, we can "play" minecraft(which will be waiting for the first frame from the game..)

Yeah, you have to build a kernel with your driver integrated.