Yes, we booted the CD into rescue mode several times we rebuilt the initrd using a regular "mkinitrd" command. It falls into kernel panic every time. Is there some other, SME-specific, way to rebuild the initrd? For some reason, when it builds the initrd, it doesn't include the ahci.ko module. On my test machine, that was the missing link. I'm still waiting for my colleague to try it on the actual server itself.
Thanks for the link to Upgrade from Disk. Will definitely do that if, for some reason, we can't get the right modules into the initrd. But we want to minimize server downtime and my colleague is afraid he would have to use a USB drive and it would take forever.