Notes: Im booting on an EEEPC 901 via USB

After updating using
apt-get update
apt-get upgrade
apt-get dist-upgrade
Everything was going fine until it got to the package linux-source 3.6.34.
After that it errored and said that there was already a /lib/modules/3.6.34/kernal folder. so i moved the 3.6.34 to 3.6.34.old
After that everything compiled fine.

But my main question is that I had to
tar -xf /usr/src/linux-source-2.6.34 
ln -s /usr/src/linux-source-2.6.34 /lib/modules/2.6.34/source
because it hadn't created the soft link.
(i assume this is what it needed to boot into the new kernel)

But then i now notice that when it was installing that update-grub only updates to /boot/
But of course it needs to update on /media/cdrom0/boot/
(because it needs to update the usb)

Searching for GRUB installation directory ... found: /boot/grub
Searching for default file ... found: /boot/grub/default
Testing for an existing GRUB menu.lst file ... found: /boot/grub/menu.lst
Searching for splash image ... found: /boot/grub/splash.xpm.gz
Found kernel: /boot/vmlinuz-2.6.34
Found kernel: /boot/vmlinuz-
Found kernel: /boot/memtest86+.bin
Updating /boot/grub/menu.lst ... done

If someone can help on this i would be grateful.