The kernel modules must be somewehre
EDIT - found them, try this:
insmod /boot/lib/modules/2.6.12.6/kernel/fs/squashfs/unlzma.ko
insmod /boot/lib/modules/2.6.12.6/kernel/fs/squashfs/sqlzma.ko
insmod /boot/lib/modules/2.6.12.6/kernel/fs/squashfs/squashfs.ko
and don't forget the lsmod (ls like list) before and after