https://fedoraproject.org/wiki/Features/ArchitectureSupport After Fedora 11 switched to the new architecture plan for x86_32, the kernel became either i586 or i686 + PAE. LiveCD created on a system with PAE support installs the i686 PAE kernel. This means the LiveCD image will fail to boot on a x86_32 system without PAE. Shouldn't the LiveCD explicitly install the i586 kernel instead? livecd-tools-021-1.fc11
There's nothing I see in either the configs or the code that would be selecting kernel-PAE and with the build I just did, kernel.i586 got pulled in. Do you have any out of the ordinary yum plugins installed or something?
I can't reproduce this at all with current livecd-tools and repos. If you're still hitting it, please attach a log of your build and the output of 'rpm -qa yum*' from your build host.