Replacing the kernel involves a new kernel compilation of course but this also means modifying several places within the image.
The first partition of the disk image contains grub boot parameters where new vmlinuz and initrd are to be replaced. Then the second partition holds a Z iso image where in the root directory, you will find once again the isolinux data with the vmlinuz and initrd files but also the modules and madwifi directories, which should be replaced as well.
Although I have not tried replacing a kernel so far, from the development image I could give it a try.
Best thing would be to have the choice within grub hence by just setting the default within the grub file (at hand), you will be able to choose.