the out of dmesg is as follows:

bt ~ # telnet
telnet> open 192.168.10.1
Trying 192.168.10.1...
Connected to 192.168.10.1.
Escape character is '^]'.


BusyBox v1.00 (2007.12.07-09:22+0000) Built-in shell (ash)
Enter 'help' for a list of built-in commands.

/ # insmod /lib/modules/2.6.*/mbcache.ko
/ # insmod /lib/modules/2.6.*/ext2.ko
/ # mount -t ext2 -o noatime /dev/mmcblk0p2 /mnt/new_root
mount: Mounting /dev/mmcblk0p2 on /mnt/new_root failed: Invalid argument
/ # dmesg
ck"
[ 1.062500] Disabling unused clock "gpt4_fck"
[ 1.062500] Disabling unused clock "gpt4_ick"
[ 1.062500] Disabling unused clock "gpt3_fck"
[ 1.062500] Disabling unused clock "gpt3_ick"
[ 1.062500] Disabling unused clock "gpt2_fck"
[ 1.062500] Disabling unused clock "gpt2_ick"
[ 1.062500] Disabling unused clock "dss2_fck"
[ 1.062500] Bootup reason: sw_rst
[ 1.062500] OMAP GPIO switch handler initializing
[ 1.062500] headphone (GPIO 107) is now disconnected
[ 1.062500] cam_turn (GPIO 12) is now inactive
[ 1.062500] cam_act (GPIO 95) is now inactive
[ 1.062500] bat_cover (GPIO 110) is now closed
[ 1.062500] menelaus 1-0072: Setting voltage 'VMEM' to 1500 mV (reg 0x0a, val 0xb4)
[ 1.078125] menelaus 1-0072: Setting voltage 'VIO' to 2500 mV (reg 0x0a, val 0xb8)
[ 1.125000] omap24xxcam omap24xxcam: sensor is TCM825x
[ 1.156250] menelaus 1-0072: Shutting off 'VIO'
[ 1.171875] menelaus 1-0072: Shutting off 'VMEM'
[ 1.187500] omap24xxcam omap24xxcam: registered device video0 [v4l2]
[ 1.242187] VFS: Mounted root (jffs2 filesystem) readonly.
[ 1.242187] Freeing init memory: 124K
[ 1.265625] mmc0: clock 400000Hz busmode 2 powermode 2 cs 0 Vdd 18 width 0 timing 0
[ 1.273437] mmc0: clock 400000Hz busmode 2 powermode 2 cs 0 Vdd 18 width 0 timing 0
[ 1.281250] mmc0: clock 400000Hz busmode 2 powermode 2 cs 0 Vdd 18 width 2 timing 0
[ 1.281250] mmc0: clock 400000Hz busmode 2 powermode 2 cs 0 Vdd 18 width 2 timing 2
[ 1.281250] mmc0: clock 48000000Hz busmode 2 powermode 2 cs 0 Vdd 18 width 2 timing 2
[ 1.601562] mmcblk0: mmc0:0002 SD 8067072KiB
[ 1.601562] mmcblk0:mmc0: clock 48000000Hz busmode 2 powermode 2 cs 0 Vdd 18 width 2 timing 2
[ 1.601562] p1 p2
[ 1.742187] mmc0: clock 400000Hz busmode 1 powermode 2 cs 0 Vdd 18 width 2 timing 2
[ 1.742187] mmci-omap mmci-omap.1: command timeout (CMD8)
[ 1.750000] mmc0: clock 400000Hz busmode 2 powermode 2 cs 0 Vdd 18 width 2 timing 2
[ 1.750000] mmc0: clock 48000000Hz busmode 2 powermode 2 cs 0 Vdd 18 width 2 timing 2
[ 1.750000] mmc1: clock 0Hz busmode 1 powermode 1 cs 0 Vdd 21 width 0 timing 0
[ 1.750000] menelaus 1-0072: Setting voltage 'VDCDC3' to 3300 mV (reg 0x07, val 0x39)
[ 1.765625] mmc1: clock 400000Hz busmode 1 powermode 2 cs 0 Vdd 21 width 0 timing 0
[ 1.765625] mmc1: clock 400000Hz busmode 1 powermode 2 cs 1 Vdd 21 width 0 timing 0
[ 1.765625] mmc1: clock 400000Hz busmode 1 powermode 2 cs 0 Vdd 21 width 0 timing 0
[ 1.773437] mmci-omap mmci-omap.1: command timeout (CMD8)
[ 1.773437] mmci-omap mmci-omap.1: command timeout (CMD8)
[ 1.773437] mmc1: clock 400000Hz busmode 1 powermode 2 cs 0 Vdd 15 width 0 timing 0
[ 1.773437] menelaus 1-0072: Setting voltage 'VDCDC3' to 2800 mV (reg 0x07, val 0x29)
[ 1.789062] mmc1: clock 400000Hz busmode 1 powermode 2 cs 1 Vdd 15 width 0 timing 0
[ 1.789062] mmc1: clock 400000Hz busmode 1 powermode 2 cs 0 Vdd 15 width 0 timing 0
[ 1.789062] mmci-omap mmci-omap.1: command timeout (CMD8)
[ 1.906250] mmc1: clock 400000Hz busmode 2 powermode 2 cs 0 Vdd 15 width 0 timing 0
[ 1.906250] mmc1: clock 400000Hz busmode 2 powermode 2 cs 0 Vdd 15 width 0 timing 0
[ 1.914062] mmc1: clock 400000Hz busmode 2 powermode 2 cs 0 Vdd 15 width 2 timing 0
[ 1.914062] mmc1: clock 400000Hz busmode 2 powermode 2 cs 0 Vdd 15 width 2 timing 2
[ 1.914062] mmc1: clock 48000000Hz busmode 2 powermode 2 cs 0 Vdd 15 width 2 timing 2
[ 1.921875] mmc1: clock 48000000Hz busmode 2 powermode 2 cs 0 Vdd 15 width 2 timing 2
[ 1.921875] mmcblk1: mmc1:b368 SD 1997312KiB
[ 1.921875] mmcblk1: p1 p2
[ 3.578125] ether gadget: using random self ethernet address
[ 3.578125] ether gadget: using random host ethernet address
[ 3.593750] usb0: Ethernet Gadget, version: May Day 2005
[ 3.593750] usb0: using musb_hdrc, OUT ep1out IN ep1in STATUS ep2in
[ 3.593750] usb0: MAC 96:b8:49:63:9e:ad
[ 3.593750] usb0: HOST MAC 4e:21:69:a6:b5:83
[ 3.593750] usb0: RNDIS ready
[ 3.593750] musb_hdrc musb_hdrc: MUSB HDRC host driver
[ 3.609375] /home/maemo/kernel/kernel-source-rx-34-2.6.21.0/drivers/usb/core/inode.c: creating file 'devices'
[ 3.609375] /home/maemo/kernel/kernel-source-rx-34-2.6.21.0/drivers/usb/core/inode.c: creating file '001'
[ 3.609375] musb_hdrc musb_hdrc: new USB bus registered, assigned bus number 1
[ 3.609375] musb_hdrc musb_hdrc: supports USB remote wakeup
[ 3.609375] usb usb1: default language 0x0409
[ 3.617187] usb usb1: new device strings: Mfr=3, Product=2, SerialNumber=1
[ 3.617187] usb usb1: Product: MUSB HDRC host driver
[ 3.617187] usb usb1: Manufacturer: Linux 2.6.21-omap1 musb-hcd
[ 3.617187] usb usb1: SerialNumber: musb_hdrc
[ 3.617187] usb usb1: uevent
[ 3.632812] usb usb1: usb_probe_device
[ 3.648437] usb usb1: configuration #1 chosen from 1 choice
[ 3.648437] usb usb1: adding 1-0:1.0 (config #1, interface 0)
[ 3.648437] usb 1-0:1.0: uevent
[ 3.664062] hub 1-0:1.0: usb_probe_interface
[ 3.664062] hub 1-0:1.0: usb_probe_interface - got id
[ 3.664062] hub 1-0:1.0: USB hub found
[ 3.664062] hub 1-0:1.0: 1 port detected
[ 3.664062] hub 1-0:1.0: standalone hub
[ 3.664062] hub 1-0:1.0: individual port power switching
[ 3.664062] hub 1-0:1.0: no over-current protection
[ 3.664062] hub 1-0:1.0: Single TT
[ 3.664062] hub 1-0:1.0: TT requires at most 8 FS bit times (666 ns)
[ 3.664062] hub 1-0:1.0: power on to power good time: 10ms
[ 3.671875] hub 1-0:1.0: 200mA bus power budget for each child
[ 3.671875] hub 1-0:1.0: local power source is good
[ 3.671875] hub 1-0:1.0: enabling power on all ports
[ 3.671875] /home/maemo/kernel/kernel-source-rx-34-2.6.21.0/drivers/usb/musb/tusb6010.c musb_platform_enable: dma not reactivated
[ 3.781250] hub 1-0:1.0: state 7 ports 1 chg 0000 evt 0000
[ 3.812500] /home/maemo/kernel/kernel-source-rx-34-2.6.21.0/drivers/usb/core/inode.c: creating file '001'
[ 5.812500] hub 1-0:1.0: hub_suspend
[ 5.812500] usb usb1: usb auto-suspend
[ 6.601562] mmc0: clock 48000000Hz busmode 2 powermode 3 cs 0 Vdd 18 width 2 timing 2
[ 6.601562] menelaus 1-0072: Setting voltage 'VMMC' to 3000 mV (reg 0x0a, val 0xb8)
[ 6.921875] mmc1: clock 48000000Hz busmode 2 powermode 3 cs 0 Vdd 15 width 2 timing 2
[ 6.921875] menelaus 1-0072: Setting voltage 'VDCDC3' to 2800 mV (reg 0x07, val 0x29)
[ 13.687500] tusb_otg_ints 743: Forcing disconnect (no interrupt)
[ 13.828125] musb_stage2_irq 817: SUSPEND (b_idle) devctl 91 power e0
[ 14.195312] tusb_otg_ints 743: Forcing disconnect (no interrupt)
[ 15.429687] musb_stage2_irq 817: SUSPEND (b_idle) devctl 99 power e0
[ 15.859375] musb_stage0_irq 669: BUS RESET as b_idle
[ 15.976562] musb_stage0_irq 669: BUS RESET as b_peripheral
[ 16.101562] musb_hdrc periph: enabled ep2in for int IN, dma, maxpacket 16
[ 16.101562] usb0: high speed config #1: 100 mA, Ethernet Gadget, using CDC Ethernet
[ 16.101562] musb_hdrc periph: enabled ep1in for bulk IN, dma, maxpacket 512
[ 16.101562] musb_hdrc periph: enabled ep1out for bulk OUT, dma, maxpacket 512
[ 16.101562] musb_hdrc periph: enabled ep2in for int IN, dma, maxpacket 16
[ 76.585937] mmc0: clock 48000000Hz busmode 2 powermode 2 cs 0 Vdd 18 width 2 timing 2
[ 76.593750] menelaus 1-0072: Setting voltage 'VMMC' to 3000 mV (reg 0x0a, val 0xb8)
[ 76.609375] mmc0: clock 48000000Hz busmode 2 powermode 2 cs 0 Vdd 18 width 2 timing 2
[ 76.710937] mmcblk0: error 1 transferring data
[ 76.710937] end_request: I/O error, dev mmcblk0, sector 10240002
[ 76.710937] EXT2-fs: unable to read superblock
[ 81.710937] mmc0: clock 48000000Hz busmode 2 powermode 3 cs 0 Vdd 18 width 2 timing 2
[ 81.710937] menelaus 1-0072: Setting voltage 'VMMC' to 3000 mV (reg 0x0a, val 0xb8)
/ # cat /proc/modules
ext2 51080 0 - Live 0xbf00b000
mbcache 7108 1 ext2, Live 0xbf008000
g_ether 26416 0 - Live 0xbf000000
/ #


Also insmod gave the same result in normal root shell and after # chroot /mnt/initfs which is 'File exists'.