Hi Turbo, I don't own a PegasOS, but I have some experiences with OF-based machines. I wonder if you ever tried to reset the OpenFirmware using the "set-defaults" command. This will reset everything, including some variables that can result in some nasty effects. real-base and load-base for example could be set to values that allow a smaller 2.4 kernel to load successfully, but a bigger 2.6 kernel could overwrite something needed by the system, eventually resulting in a system crash.
Just an idea... Christian