Description of problem:
Due to anaconda changes (installer stage2 merged into initrd.img), preupgrade fails on /boot < 200MB. 128MB was a common /boot size in older Fedora installations.
preupgrade should offer the option to
a) generate a USB boot stick, or
b) copy the files to an alternative directory with the correct grub entry, so that power users can copy it to their own USB sticks.
Version-Release number of selected component (if applicable):
I mounted another partition on /boot/upgrade, so that preupgrade continued. Afterwards I moved those files to my USB stick. But the boot is unsuccessful as root can't be found. My guess is that some option is required to tell the initrd that it is BOOTED from the USB stick but should INSTALL on the internal hard-drive. (root= doesn't do this, BTW)
I don't think the small boot problem is much of a problem for most people. In the current version of preupgrade we just tell the user to use the dvd if there is such a tiny /boot filesystem. That said, if you come up with a patch for preupgrade to use a usb device, I'll happily review it.