Solved!

This is not for the feint of heart!
Ok took me a long time but the theory was right. I have a full version of Kubuntu running on my DT360. The Initrd file doesn't have the necessary modules to recognize the hardware in the DT360. So you need to add the following modules to your Initrd.
etc/pcmcia
etc/pcmcia/config.opts
etc/default/pcmciautils
etc/init.d
etc/init.d/pcmciautils
bin/hotplug-pcmcia
sbin/lspcmcia
sbin/pccardctl
lib/udev/pcmcia-socket-startup
lib/udev/rules.d/85-pcmcia.rules
lib/udev/pcmcia-check-broken-cis
lib/libsysfs.so.2.0.1
lib/modules/2.6.31-16-generic/kernel/drivers/pcmcia/yenta_socket.ko
lib/modules/2.6.31-16-generic/kernel/drivers/pcmcia/rsrc_nonstatic.ko
lib/libsysfs.so.2
Basically the CF Card slot is part of the PCMCIA socket not the IDE.
Basic concept is this:
boot from the internal flash HDD which is mounted as /boot and contains grub and the initrd file. Grub looks for the / "root" partition on the CF card. The system boots. Be sure to look at your /boot/grub/menu.lst and make sure the UUID is correct for your CF card.
I have a DD image of my internal 35mb hdd I will make available when I find somewhere to put it online. I'll also share my Initrd file. Please note that any kernel updates will blow away the modified initrd file with a stock one and your system will not boot.
Good Luck.