tried to compile custom kernel from provided sources and make generated following error:
scripts/Makefile.build:17: /usr/src/linux-2.6.18-ARCH/init/Makefile: No such file or directory
make: *** No rule to make target `/usr/src/linux-2.6.18-ARCH/init/Makefile'. Stop.
make: *** [init] Error 2
So I downloaded vanilla and this worked fine.
I was wondering if make install script will use mainitcpio however this did not work either as install.sh script is looking at /dev/hda which is read-only installation device (cd/dvd)
So I copied vmlinuz and system.map and generated img file manually.
There are no "provided sources" in Arch. /usr/src/linux-<kernel_version> contains only those elements of the compiled kernel that are required to build against, so getting the source from kernel.org is the right thing to do.
If you want to build a kernel package that uses mkinitcpio, like the official Arch kernels do, you need to create a PKGBUILD, or modify an existing one, and use ABS (Arch Build System). The wiki has all the details.