Well I guess since no one here can/want to help me , I'll use this thread to document my progress. Maybe someone somewhere will stumble upon it and would help him out.
I found out how to enable kernel output to show on the serial console. In boot.ini I changed the following as told by @zador.blood.stained here
I set setenv verbosity from 1 to 7, which gave me kernel output.
The last few lines are the following:
So it seems the kernel is stuck doing something with it's network settings. It can get a link and IP address however.
I vaguely remember (i messed this up a week ago, only just now did I get a UART-USB) changing something with the network settings.
I'll see if I can revert everything back to default.
PS. On a separate note, I just noticed that the kernel spent some 90 seconds creating swap. As soon as I get everything working again, I'll disable swap. 2GB RAM is enough for my purposes.