The jacal_main/bootdisk directory contains the information needed to create the JACAL bootdisk. In order to create the bootdisk you will need Lilo version 21.4-2 or greater. You may also have success with versions of Lilo that are much older than 21.4-2. Versions of Lilo right before 21.4-2 have a bug that truncated the "append" line in the lilo.conf making it difficult to get the bootdisk to find the root partition over the network.
The script mkdisk will create the bootdisk on the disk currently in the floppy drive. It uses the currently linked bdlilo.conf as the config file to pass to lilo. It also uses the currently linked bzImage as the boot kernel for the bootdisk. A sample configuration for the kernel is jacal_kernel_2.2.14.conf.
Some notes on compiling the kernel. You will probably want to compile a kernel without modules and you definitely do not want to compile NFS support as a module because the kernel grabs its root filesystem over NFS. Which also means that you will need to compile in support for the kernel to be able to mount its root filesystem over NFS. You also need to compile in support for DHCP/Bootp unless you want to hard code the ip address of the build machine. You probably want DHCP unless you will only be building one machine at a time.
The bdlilo.conf file contains configuration information for the kernel on the bootdisk. The main line of interest is the "append" line which specifies where the kernel should look for its NFS root filesystem.