OK..... have been burried in this and staring to get my head around it, but have now hit a problem (apart from my wife starting to call me a git!)

I'll try to reassemble my path here in case Ive done something stupid in the earlier steps.

1. new virtual machine version 11.10 upgraded to 3.0.0-17 x86_64
2. grabbed every package via apt-get that seemed relevant
3. basic structure as per your script. git clone from kernel.org under linux. git clone of ubuntu-natty
4. modified your script to grab from ubuntu-natty rather than oneiric
5. tried compiling with your script prior to bisect and all worked, producing me .deb packages for 3.0.0-17
6. reconfigured virtual and threw 8 cores at it (forgot how long it takes to compile a kernel.
7. changed to $HOME/linux-source/linux
8. git checkout mcebisect
9. git bisect start
10. git bisect good v2.6.35
11. git bisect  bad v2.6.36-rc1
- complained about modfied files not commited (presuming from previous build)
12. git stash
-bisect completed with over 4000 / 12 to go.
13. up one level and ran your modified script. 
-Compile failed. 
14. back into ./linux
15. git bisect bad ##toss a coin - well almost. I saw lots of early comits in the log for acpi and temprature, which I've always suspected re this bug. figured that a bad guess would bisect next with early part included.... thereby keeping it in the mix - easy to see test fail as the panic happens more quickly than waiting to be sure that it hasnt. 
- got same error regarding comits. 
16. git stash
-bisect proceeded and worked.
17. Updated script with revision and comment and re-ran.
-Compile Fail again. 
18. git clean, git reset, git checkout, git bisect start, git bisect good v2.6.35, git bad 2.6.36-rc1, recompiled again (just to make sure it wasnt something stuid I did in the setup.
- Compile failed as expected.
19.  This time git bisect good  # guess the other way
-Compile failed again. 

Where to from here?

A couple of other aside questions:
1. Am I right that the the ubuntu git version is only there to grab the control scripts?
2. Are there any issues / version problems grabbibg the ubuntu-package on my 3.0.0-7 system?

Thanks for your continued help. 

Your modified script:
#!/bin/bash
#Where the linux directory resides
BASE=$HOME/linux-source
#REVISION=1step1: START OK 4072, Compile broke.
#REVISION=1step2: GUESSED BAD, Compile Broke. Dead End.
#REVISION=2step1: START OK 4072, Compile Broke.           
#REVISION=2step2: GUESSED GOOD, Compile Broke
REVISION=2step2
BUG=lp801840

cd $BASE/linux
git clean -f -d -x
git clean -f -d -X
cp /boot/config-`uname -r` .config
yes '' | make oldconfig
sed -i 's/CONFIG_DEBUG_INFO=y/CONFIG_DEBUG_INFO=n/' .config
sed -i 's/CONFIG_SYS_HYPERVISOR=y/CONFIG_SYS_HYPERVISOR=n/' .config
sed -i 's/CONFIG_XEN_SYS_HYPERVISOR=y/CONFIG_XEN_SYS_HYPERVISOR=n/' .config
sed -i 's/CONFIG_XEN=y/CONFIG_XEN=n/' .config

sed -rie 's/echo "\+"/#echo "\+"/' scripts/setlocalversion
cd $BASE
cp -a /usr/share/kernel-package ubuntu-package
#The following should be one line each cp command
cp ubuntu-natty/debian/control-scripts/{postinst,postrm,preinst,prerm} ubuntu-package/pkg/image/
cp ubuntu-natty/debian/control-scripts/headers-postinst ubuntu-package/pkg/headers/
#OK, let's compile
cd $BASE/linux
CONCURRENCY_LEVEL=9 fakeroot make-kpkg --initrd \
    --append-to-version=-bmc-$BUG --revision=$REVISION \
    --overlay-dir=$BASE/ubuntu-package kernel_image kernel_headers