Your inittab should be changed so that its sysinit line runs rc or whatever basic boot script will be used. Also, if you want to ensure that users on serial ports cannot login, comment out all the entries for getty which include a ttys or ttyS device at the end of the line. Leave in the tty ports so that you can login at the console.
A minimal inittab file looks like this: id:2:initdefault:
si::sysinit:/etc/rc
1:2345:respawn:/sbin/getty 9600 tty1
2:23:respawn:/sbin/getty 9600 tty2
The inittab file defines what the system will run in various states including startup, move to multi-user mode, etc. Check carefully the filenames mentioned in inittab; if init cannot find the program mentioned the bootdisk will hang, and you may not even get an error message.
Note that some programs cannot be moved elsewhere because other programs have hardcoded their locations. For example, on my system, /etc/shutdown has hardcoded in it /etc/reboot. If I move reboot to /bin/reboot, and then issue a shutdown command, it will fail because it cannot find the reboot file.
For the rest, just copy all the text files in your /etc directory, plus all the executables in your /etc directory that you cannot be sure you do not need. As a guide, consult the sample listing in Appendix C. Probably it will suffice to copy only those files, but systems differ a great deal, so you cannot be sure that the same set of files on your system is equivalent to the files in the list. The only sure method is to start with inittab and work out what is required.
Most systems now use an /etc/rc.d/ directory containing shell scripts for different run levels. The minimum is a single rc script, but it may be simpler just to copy inittab and the /etc/rc.d directory from your existing system, and prune the shell scripts in the rc.d directory to remove processing not relevent to a diskette system environment.
4.3.3. /bin and /sbin
The /bin directory is a convenient place for extra utilities you need to perform basic operations, utilities such as ls, mv, cat and dd. See Appendix C for an example list of files that go in a /bin and /sbin directories. It does not include any of the utilities required to restore from backup, such as cpio, tar and gzip. That is because I place these on a separate utility diskette, to save space on the boot/root diskette. Once the boot/root diskette is booted, it is copied to the ramdisk leaving the diskette drive free to mount another diskette, the utility diskette. I usually mount this as /usr.
Creation of a utility diskette is described below in Section 9.2. It is probably desirable to maintain a copy of the same version of backup utilities used to write the backups so you don't waste time trying to install versions that cannot read your backup tapes.
Be sure to include the following programs: init, getty or equivalent, login, mount, some shell capable of running your rc scripts, a link from sh to the shell.
4.3.4. /lib
In /lib you place necessary shared libraries and loaders. If the necessary libraries are not found in your /lib directory then the system will be unable to boot. If you're lucky you may see an error message telling you why.
Nearly every program requires at least the libc library, libc.so.N, where N is the current version number. Check your /lib directory. The file libc.so.N is usually a symlink to a filename with a complete version number:
% ls -l /lib/libc*
-rwxr-xr-x 1 root root 4016683 Apr 16 18:48 libc-2.1.1.so*
lrwxrwxrwx 1 root root 13 Apr 10 12:25 libc.so.6 -> libc-2.1.1.so*
In this case, you want libc-2.1.1.so. To find other libraries you should go through all the binaries you plan to include and check their dependencies with ldd. For example: % ldd /sbin/mke2fs
libext2fs.so.2 => /lib/libext2fs.so.2 (0x40014000)
libcom_err.so.2 => /lib/libcom_err.so.2 (0x40026000)
libuuid.so.1 => /lib/libuuid.so.1 (0x40028000)
libc.so.6 => /lib/libc.so.6 (0x4002c000)
/lib/ld-Linux.so.2 => /lib/ld-Linux.so.2 (0x40000000)
Each file on the right-hand side is required. The file may be a symbolic link.