Sorry to answer a bit late. It should in theory be simple to upgrade to a 2.6 kernal. The 2.6 kernel is in the xbox linux repository and there is a guide for xebian upgrading to 2.6. Though I've not heard of anyone sucessfully doing it on xdsl.
Could you tell me what commands you used to upgrade to etch? I'm assuming you edited your apt/sources.conf to include the stable dist and then did:- $apt-get dist-upgrade && apt-get -f install ,or something like that. I upgraded to sarge before, but had more of a problem with etch and gave up pretty quickly.
Have you tryed using bittornado or azeurus from the dsl repositoy, they both work pretty well on xdsl although you have to do some port forwarding to get bittornado working properly.