After some trial and error and many hours of googling, I managed to compile several images to the end.
At first, I was having problems with /dev/rtc not being created during bootup process. I changed the version of udev from default 151 to 124 and that fixed the problem. The latest kernel from cvs works much better with bluetooth and wifi , but some changes in angstrom-2008.1.conf need to be done to compile it properly. All files and images could be found here.
Using boot loader I uploaded images through com port and booted with these settings:
set linuxargs "root=mtd1 console=ttyS0,115200n8 console=tty0 noinitrd 115200 ttyS0 vt100"
boot
Both console image and opie imaged worked fine, but for gpe touch screen would not work.