I had a similar problem with the same tools... kernel was somewhere between
1.3.57 and 1.3.66 or so (don't recall now, some time ago). After a couple
hours, I finally figured out it was the libc (5.2.18) that wasn't doing
readdir()'s to find files. If something was referencing a file by full
pathname, it open'ed just dandy. Backtracked to libc 5.0.9, things were fine -
but that wasn't great because some tools needs a post-5.0.9 libc to build.
BTW, I used strace -f -ff -o strace.out make <any optional args you want>
to find out. If you have access to 5.0.9 (or some non-5.2.18 libc) and
5.2.18, do the strace for both (although change -o <output file> to something
else so not to overwrite anything...), and you should see the difference
easily.
-Dan