MTD partitions can be hardcoded into the kernel or defined through the kernel command line. kexecboot kernels provided by openembedded default to partitions hardcoded into the kernel. the partitions are defined in "/drivers/mtd/nand/sharpsl.c". Now, i presume you want one partition of maximum size (121Mib i believe). This is a problem since the zubuntu flash installer assumes two partitions as defined by the sharp rom and it's derivatives (or maybe early 2.4 kernel based pdaxrom builds, i can't remember) while the kexecboot kernel also assumes two (or three?) partitions but of different sizes. I think that's your problem.
What i think you should do:
1). use pdaxrom R198 to run zubuntu flash installer and change the script to install to /dev/mtdblock2. R198 defines by default a 121Mib nand partition (mtdblock2).
2). You need to change the nand partitioning in the kexecboot kernel. Either change the definitions in sharpsl.c or provide partition definitions via the kernel command line.
(add "mtdparts=sharpsl-nand:7168k(System),-(Rootfs)" to the kernel command line).
This _should_ work but i can't give you any guarantees.
But be warned. If this works, zubuntu will still need the SD card inserted at all times. The biggest part of the rootfs tree is still on the SD card, namely the whole "/usr" tree. The zubuntu rootfs will simply not fit inside the nand chip. As for speed improvements, i dont think you will see a big difference.