I was having a problem with adding compressed initrd images to my Linux payload with cbfstool. What I noticed is that if I build my initrd.cpio file and compress/link it into the bzImage via the Linux kernel's .config file, the kernel starts up just fine and executes out of the initrd. Likewise, if I have the coreboot .config bundle the bzImage and an uncompressed initrd.cpio, then it also works, but produces an image much too large for a real system. However, trying to have cbfstool bundle initrd.cpio.xz would cause the kernel to panic.
Digging through the Linux kernel build scripts, I found that linux/scripts/gen_initramfs_list.sh passes in some extra options to compress the initrd.cpio file before linking it in. These options are necessary for the kernel to be able to decompress the xz file:
xz \ --check=crc32 \ --lzma2=dict=1MiB \ --extreme \ < "$<" \ > "$@"
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Trammell Hudson