The payload is an ELF file. It can be anything that will fit in the flash.
In the beginning, the only payload we supported was a linux kernel. Over the years, we have supported many different payloads, including non-linux kernels, many bootloaders, and even a VM.
The last time I used a kernel as a payload was 2007, on an Ultra 32 box. Worked fine.
All these payloads ran on our initial systems: x86, Alpha, and PowerPC.
A MIPS system does not look like a hard problem.
It is not correct to say that a kernel payload can not fit in 512KB.
ron