Ok. Let's slow down a bit. Have a stock LXDE-2010.12 ISO. Install PCLOS from it, in a VMWare VM, update it (via Synaptic) plus six of my own choice packages, tweak my choices a bit, BleachBit, BleachBit Root. Don't need umount -a, as I only the default two partitions.
Let's pause for a bit: my first true attempts failed immediately. No ISO at all. I thought it was due to insufficient disc space, expanded the virtual drive, then reinstalled PCLOS from scratch. But mylivecd failed immediately again ! It finally dawned on me that the default PATH was wrong and I had to manually add /sbin+/usr/sbin to root's .bashrc (a skinny little file I carry from system to system, an addition that came only after I recognized the problem.) Before I got mylivecd running, I also d/l'd a fresh LXDE ISO and compared the MD5 signature to the one I'd been using.
Once I fixed tha PATH, my next mylivecd attempt ran to completion w/o errors or warnings (or at least no warnings of consequence that I recall.) Copied the ISO to a flash drive, burned and tried it. No joy. 'Unable to mount loop filesystem'. The error messages suggest that the error might come from a faulty copy, but I dismissed that possibility by comparing the MD5 signature of my original ISO to one I downloaded over the weekend.
I tried updating the kernel as Tex suggested, but I did so blindly, although I did read that Zore (the thread starter) had good results. I'd simply like to know why a kernel update is called for, because kernel updates between distro releases are rare, unless one needs something specific that's only available via a new kernel.
For the record, having the kernel package modify the boot menu, so one can select/boot/test with a particular kernel is most impressive. You don't get that when compiling a kernel from a tarball. Now, must sign off to do some housekeeping to test this new ISO....