The first post gives my problem: http://qemu-forum.ipi.fi/viewtopic.php?t=3981
This link provides the fix: http://article.gmane.org/gmane.comp.emulators.qemu/18976This is because I have a *very* small kernel (less than 2MB). I tested this by using the full stock kernels devel (which worked).
Keep up the good work :)