I've been chasing this same thing for several days now. I managed to get a workable 2.6.0- kernel compiled; I can run it from a HD-based install. (This from a previous Knoppix HD install, with 2.6.0 kernel sources applied).

The same compiler errors are present when I attempt to make cloop.o. I'm using the 2.0 version of cloop-src/utils but have tried it with previous versions as well.

Looking at the entire picture, it seems that a number of changes have been made to blkdev.h in the 2.6.0 kernels...and that may be part of the problem.