The sources at distro.ibiblio.../pdaxrom/src aren't patched? Does it matter?
No ... they get patched with make kernel_prepare from the stuf in ~/pdaxrom_builder/trunk/local_patches/linux-2.6.16/arm/....
I'm trying to build the DM9601 module, and maybe packet-injection-patched hostap drivers, if it matters.
Once you have the whole kernel sources patched with the arm and pdaxrom patches you can do whatever you like: add other patches, change kernel setup, build kernel or build just modules. If you have no experience with this stuff read the README in the kernel sources.
EDIT: Oh, and how hard is it to install the builder in a virtual machine and have networking support?
It's a simple. I use vmware because xen is teased with the slackware non xen friendly Thread Safe Library so I can give you a quick overview for vmware:
install the vmware software (in this step you must decide what type of networking you are going to give to the virtual machines: (*)bridged or nat),
create a new virtual machine and give it decent resources (disk ram and cpu),
put the pdaxrom-builder.iso somewhere where the vmware virtual machine can see it,
set up the properties on the virtual machine so that it uses the iso image as CD image (not the physical dryve),
boot the virtual machine and setup the pdaxrom-builder to HD in the virtual machine,
setup the builder following note 101 (if I remember correctly).
There you are: 15 minutes work and you have the pdaxrom-builder working (understanding how it works is a different beast ... but you can bug the hell out of Adrian for that as he did the same to Sash in turn ;-) )
* Bridged is good if you can give your VM's real addresses belonging to the same address space of the host machine, nat is godd when you aonly have one address avalible on the network where the host is attached so the VM's get another IP address and get automatically natted (like masquerade) to the address of your host.