After nearly a month of fiddling with LFS I finally got it working! It's really amazing to finally see the prompt that I built. :)
This is where exactly the journey begins. But before going beyond there are some issues to cope with:
1. An 'iso-8859-1 invalid identified' error after login -- I hope this would not lead to too severe locale-related issues
2. Drives that were hdaX on my previous host system are now named sdaX in the LFS system -- this may have to do something with udev?
3. There is no working eth0 interface which is the most painful part. Maybe this has something to do with the fact that I've compiled the kernel with make defconfig?
Before really starting to do BLFS, I will investigate these issues, which will be easy since I have a snapshot inside the chroot environment with the livecd.