Problem booting RHEL3 using USB drive

[mehranalmasi]

HI,
I have installed RHEL3 on an external USB drive. After installation and rebooting of the system, I get "Kernel Panic: VFS:Unable to mount root FS on 00:00" after grub comes up.

If I try root (hd0,1) I get:
Filesystem is ext2fs, partition type 0x83
kernel /vmlinuz-2.4.21-50.ELsmp ro root=LABEL=/
Error 15: File not found
Press any key to continue


Here is some more information:
grub> root (hd0,1) (TAB)
Filesystem is ext2fs, partition type 0x83
grub> kernel (hd0,1)/boot/ (TAB) .. and I get...
grub> kernel (hd0,1)/boot/

grub> find /grub/stage1
(hd0,0)
grub> root (hd0,0)
Filesystem is ext2fs, partition type 0x83
grub> setup (hd0)
checking if "/boot/grub/stage1" exists.. no
checking if "/grub/stage1" exists..yes
checking if "/grub/stage2" exists.. yes
checking if "/grub/e2fs_stage1_5" exists..yes
running "embed /grub/e2fs_stage1_5 (hd0)"... 16 sectors are embeded.
succeeded
running "install /grub/stage1 (hd0) (hd0)1*16 p (hd0,0)/grub/stage2 /grubconf"... succedded
Done.

after reboot I get the same error. Any idea how to fix this? thanks in advance.