I have done some research and experimentation and am reporting the results with possible follow up.
1) Resolve mistaken attempt at LiveUSB Kernel upgrade by making USB into a full install with upgraded kernel:
A) remaster LiveUSB as fall-back to disc 1, this remaster has both versions of the kernel marked as present;
B) open Synaptic, mark the upgrade version of the kernel for removal, apply changes, the USB has only the old version of the kernel marked in Synaptic, but I found it was not particularly stable;
C) remaster LiveUSB to disc 2, this remaster has only the old version of the kernel marked in Synaptic, but *may* still have elements of the upgrade kernel present;
D) shut down system;
E) boot system from disc 2;
F) install PCLinuxOS from disc 2, at this stage the USB is an installed version of the old version of the kernel;
G) open Synaptic, mark the upgrade kernel for installation, apply changes.
H) shut down the system and remove disc 2;
I) boot the system from the USB, wait for the upgrade to complete. The USB is now is an installed PCLinuxOS system with an upgraded kernel.
I cold boot at this stage so the system has a "clean" load.
Nothing amazing, but I have demonstrated that the failed kernel upgrade to a LiveUSB, at least in my case of 220.127.116.11-pclos1.bfs to 18.104.22.168-pclos3.bfs, does not prevent recovery and force a clean install. I think that topic http://www.pclinuxos.com/forum/index.php/topic,92863.0.html
could be updated to mention that LiveUSB systems cannot be upgraded in place, but need to be converted to an installation or go through a tested process. I happy to assist with testing and / or documenting.
Now I have an upgraded kernel, is it recommended to remove the back rev kernel. If so, do I remove or completely remove it?
After that, I will reconvert to a LiveUSB to reduce the write wear and tear on my USB that an installed version causes compared to a LiveUSB version. And I will always have a fresh-ish remaster on hand because you are only as good as your last successful back-up!
2) Remaster parameters create a logical loop and perpetual process
There have been a couple of instances of this reported already. I fell for it, went looking for reports in the fora and found it mentioned. The most common scenario appears to be someone with a tight / partition and lots of room on their /home partition and using the iso file specification to point to /home.
I have not yet looked at the iso creation program but I suspect that, having watched it through two iterations doing what looks like this, it compresses / to /home then starts to compress /home, is alerted to /home changing (that would be the first block or so being added to the iso file) qand decides to start again from scratch. I have seen disc checking software do the same thing. I will look at the iso program and report back.
I am happy to assist with updating existing fora entries, wiki entries and mylivecd coding and testing to deal with this.
3) draklive-install crash (@as please note)
My earlier reported issue is a hard, reproducible issue. I had a single partition device, formatted to FAT32 attached to my system when I ran draklive-install. On every occasion it returned "Assertion (head_size <= 63) at dos.c:661 in function probe_partition_for_geom() failed.". This is caused by a regression bug introduced into libparted 1.9.0 and fixed in parted 2.4. This is a hard error that can be corrected by removing the device from the system (in my case a factory formatted USB). See http://anonscm.debian.org/gitweb/?p=parted/parted.git;a=commitdiff;h=616a2a1659d89ff90f9834016a451da8722df509.
I have not upgraded parted on my system, but will do that next and report back. May take a week...
Parted is now at 3.0 since 2011-05-30, see http://anonscm.debian.org/gitweb/?p=parted/parted.git;a=shortlog;pg=1
I suggest that documentation, e.g. fora, wiki, etc be updated to note this issue, and upgrading parted to 3.0 in the repositories be looked into. As with other items, I am happy to assist with upgrading fora items, wiki, testing etc.
If someone can put me into contact with the appropriate people for the various tasks I would be grateful.
Thanks for your help and cheers!