Thanks Mickey,
Will be carefull in the future with the NAND backups, but it worked for me fine.
I have obtained a clean NAND backup for sl-5600 PXA-250 from one of the ZUG users and was able to restore my Z .
Afterwards I finally figured out my problem. What happened was that I have somehow placed OZ zImage instead of the tkcRom's zImage (the one I am using now). This resulted in this peculiar situation where I was getting half of each and neither was complete enough to function.
Thanks all for your input.
Dmytro