I can tell you why, your /system directory was full and couldn't contain the entire kernel image. As you flash without wiping the /system directory gets full of files from previous ROM flashes that normally would be wiped out.
I hate that your nandroid did not work, was it an RZR, CWR or actual Nandroid backup?
Yeah it sucked. But maybe it was time for a clean wipe anyways. The back up that didn't fly was rzr. First time it didn't work. Sucks it had to be now. So by just flashing the kernel no system files got dumped and it only took a partial image, I see. Any suggestions on a remedy?
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Not exactly, previous ROM flashes contain files that updated versions (especially CM nightlies) do not contain..extraneous files that would be removed by a wipe. When you flash a kernel the routine uses /tmp which is actually a /system folder, if the /system MTD partition is full there will not be room for the kernel image and your left with no boot.img to flash to the /boot MTD partition.
You should discuss your RZR nandroid issue with RaidZero as your not the first this has happened to, perhaps he can fix the issue. What good is a recovery that creates bad backups.
For sure on the recovery side of things. I will take that up in a minute or so. The steps I took when the image didn't take were:
Wipe system, boot, cache, dalvik.
Install CM7 #54
Install gapps
Install newest Prime Kernel
Install link2sd pre-install
Reboot
This resulted in bootlooping at the flash screen "M".
Flashed kernel reporting #8, up an running again.
I open to any suggestions as your work, Prime, is the tops