I have installed ubuntu 11.04 on my system.
After this when I used to give uname -r it showed me kernel version as 2.6.38.

Now I had downloaded kernel 2.6.34.12 from kernel.org and installed it using the following steps:

make
make modules
make modules_install
make install

System.map-2.6.34.12
vmlinuz-2.6.34.12
config-2.6.34.12

update-initramfs -c -k 2.6.34.12

update-grub

This is why I dislike the excessive automation ubuntu's put in the process, none of those commands are standard so we can't tell if you're using them right, and there's little way to tell whether they even succeeded, or what success even means...

What did your grub.cfg actually look like in the end?

Thanks coronna for the reply.

grub.cfg contents are as follows:

#
# DO NOT EDIT THIS FILE
#
# It is automatically generated by grub-mkconfig using templates
# from /etc/grub.d and settings from /etc/default/grub
#

### BEGIN /etc/grub.d/00_header ###
if [ -s $prefix/grubenv ]; then
  set have_grubenv=true
  load_env
fi
set default="0"
if [ "${prev_saved_entry}" ]; then
  set saved_entry="${prev_saved_entry}"
  save_env saved_entry
  set prev_saved_entry=
  save_env prev_saved_entry
  set boot_once=true
fi

function savedefault {
  if [ -z "${boot_once}" ]; then
    saved_entry="${chosen}"
    save_env saved_entry
  fi
}

function recordfail {
  set recordfail=1
  if [ -n "${have_grubenv}" ]; then if [ -z "${boot_once}" ]; then save_env recordfail; fi; fi
}

function load_video {
  insmod vbe
  insmod vga
  insmod video_bochs
  insmod video_cirrus
}

insmod part_msdos
insmod ext2
set root='(hd0,msdos1)'
search --no-floppy --fs-uuid --set=root aff29280-0f0d-4a9e-b692-cecd22f321ca
if loadfont /usr/share/grub/unicode.pf2 ; then
  set gfxmode=auto
  load_video
  insmod gfxterm
fi
terminal_output gfxterm
insmod part_msdos
insmod ext2
set root='(hd0,msdos1)'
search --no-floppy --fs-uuid --set=root aff29280-0f0d-4a9e-b692-cecd22f321ca
set locale_dir=($root)/boot/grub/locale
set lang=en_US
insmod gettext
if [ "${recordfail}" = 1 ]; then
  set timeout=-1
else
  set timeout=10
fi
### END /etc/grub.d/00_header ###

### BEGIN /etc/grub.d/05_debian_theme ###
set menu_color_normal=white/black
set menu_color_highlight=black/light-gray
if background_color 44,0,30; then
  clear
fi
### END /etc/grub.d/05_debian_theme ###

### BEGIN /etc/grub.d/10_linux ###
if [ ${recordfail} != 1 ]; then
  if [ -e ${prefix}/gfxblacklist.txt ]; then
    if hwmatch ${prefix}/gfxblacklist.txt 3; then
      if [ ${match} = 0 ]; then
        set linux_gfx_mode=keep
      else
        set linux_gfx_mode=text
      fi
    else
      set linux_gfx_mode=text
    fi
  else
    set linux_gfx_mode=keep
  fi
else
  set linux_gfx_mode=text
fi
export linux_gfx_mode
if [ "$linux_gfx_mode" != "text" ]; then load_video; fi
menuentry 'Ubuntu, with Linux 2.6.38-8-generic' --class ubuntu --class gnu-linux --class gnu --class os {
	recordfail
	set gfxpayload=$linux_gfx_mode
	insmod part_msdos
	insmod ext2
	set root='(hd0,msdos1)'
	search --no-floppy --fs-uuid --set=root aff29280-0f0d-4a9e-b692-cecd22f321ca
	linux	/boot/vmlinuz-2.6.38-8-generic root=UUID=aff29280-0f0d-4a9e-b692-cecd22f321ca ro   
	initrd	/boot/initrd.img-2.6.38-8-generic
}
menuentry 'Ubuntu, with Linux 2.6.38-8-generic (recovery mode)' --class ubuntu --class gnu-linux --class gnu --class os {
	recordfail
	set gfxpayload=$linux_gfx_mode
	insmod part_msdos
	insmod ext2
	set root='(hd0,msdos1)'
	search --no-floppy --fs-uuid --set=root aff29280-0f0d-4a9e-b692-cecd22f321ca
	echo	'Loading Linux 2.6.38-8-generic ...'
	linux	/boot/vmlinuz-2.6.38-8-generic root=UUID=aff29280-0f0d-4a9e-b692-cecd22f321ca ro single 
	echo	'Loading initial ramdisk ...'
	initrd	/boot/initrd.img-2.6.38-8-generic
}
submenu "Previous Linux versions" {
menuentry 'Ubuntu, with Linux 2.6.34.12' --class ubuntu --class gnu-linux --class gnu --class os {
	recordfail
	set gfxpayload=$linux_gfx_mode
	insmod part_msdos
	insmod ext2
	set root='(hd0,msdos1)'
	search --no-floppy --fs-uuid --set=root aff29280-0f0d-4a9e-b692-cecd22f321ca
	linux	/boot/vmlinuz-2.6.34.12 root=UUID=aff29280-0f0d-4a9e-b692-cecd22f321ca ro   
	initrd	/boot/initrd.img-2.6.34.12
}
menuentry 'Ubuntu, with Linux 2.6.34.12 (recovery mode)' --class ubuntu --class gnu-linux --class gnu --class os {
	recordfail
	set gfxpayload=$linux_gfx_mode
	insmod part_msdos
	insmod ext2
	set root='(hd0,msdos1)'
	search --no-floppy --fs-uuid --set=root aff29280-0f0d-4a9e-b692-cecd22f321ca
	echo	'Loading Linux 2.6.34.12 ...'
	linux	/boot/vmlinuz-2.6.34.12 root=UUID=aff29280-0f0d-4a9e-b692-cecd22f321ca ro single 
	echo	'Loading initial ramdisk ...'
	initrd	/boot/initrd.img-2.6.34.12
}
}
### END /etc/grub.d/10_linux ###

### BEGIN /etc/grub.d/20_linux_xen ###
### END /etc/grub.d/20_linux_xen ###

### BEGIN /etc/grub.d/20_memtest86+ ###
menuentry "Memory test (memtest86+)" {
	insmod part_msdos
	insmod ext2
	set root='(hd0,msdos1)'
	search --no-floppy --fs-uuid --set=root aff29280-0f0d-4a9e-b692-cecd22f321ca
	linux16	/boot/memtest86+.bin
}
menuentry "Memory test (memtest86+, serial console 115200)" {
	insmod part_msdos
	insmod ext2
	set root='(hd0,msdos1)'
	search --no-floppy --fs-uuid --set=root aff29280-0f0d-4a9e-b692-cecd22f321ca
	linux16	/boot/memtest86+.bin console=ttyS0,115200n8
}
### END /etc/grub.d/20_memtest86+ ###

### BEGIN /etc/grub.d/30_os-prober ###
if [ "x${timeout}" != "x-1" ]; then
  if sleep --verbose --interruptible 10 ; then
    set timeout=0
  fi
fi
### END /etc/grub.d/30_os-prober ###

### BEGIN /etc/grub.d/40_custom ###
# This file provides an easy way to add custom menu entries.  Simply type the
# menu entries you want to add after this comment.  Be careful not to change
# the 'exec tail' line above.
### END /etc/grub.d/40_custom ###

### BEGIN /etc/grub.d/41_custom ###
if [ -f  $prefix/custom.cfg ]; then
  source $prefix/custom.cfg;
fi
### END /etc/grub.d/41_custom ###