/sys and /proc are bind-mounted below /mnt so all I do is exit setup, chroot /mnt and run
  $(/usr/share/mkinitrd/mkinitrd_command_generator.sh -r) to create the /boot/initrd.gz and then run
  /usr/share/mkinitrd/mkinitrd_command_generator.sh -l /boot/vmlinuz-generic-2.6.29.2 >> /etc/lilo.conf followed
  by "lilo" (but usually I fix the label name first and make my generic kernel the default option)