Ok so I have been searching around for probably two weeks trying to figure out what I am missing from this whole process. I have found many different versions of setting up the SD card and tried pretty much everything. The furthest that I got was to the point where it finished reading / loading the kernel and then stopped at "Done, booting kernel."
1. The kernel is from the online builder using only the default packages and a console terminal. (Angstrom/2.6.30+2.6.31rc7/omap3e)
2. X-loader and U-boot are stored in the Micron NAND Flash (X-loader 1.42, U-boot 2008.10)
I am in the progress of building my own linux-omap kernel from git repository and will post my results but in the meantime I would be more than grateful for anyone who has recent experience building linux/Angstrom for the omap3evm. I don't have a particular preference if it's using rootfs on MMC or over NFS but I need it to start working ASAP!
update: just tried building a new kernel, Linux-2.6.32-rc6 and still gets stuck at the same point. No changes to the def_config.