You will need a full linux distribution to build your own embedded linux OS. It will contains everything you need (utilities, sources, compiler, debugger, documentation....).
This is a list of the software i used to make LEM. Other specialized software for embedded purpose may be foud at
TinyLogin is a suite of tiny Unix utilities for handling logging into, being authenticated by, changing one's password for, and otherwise maintaining users and groups on an embedded system. It also provides shadow password support to enhance system security. TinyLogin is, as the name implies, very small, and makes an excellent complement to BusyBox on an embedded System. TinyLogin is being maintained by Erik Andersen
TinyLogin is available at http://tinylogin.lineo.com
Busybox is a multicall binary used to provide a minimal subset of POSIX style commands and specialized functions.It is geared toward the very small, i.e. boot floppies, embedded-systems, etc. Specifically it is used in the Debian Rescue/Install system (which caused the original busybox to be made), the Linux Routeur Project, LEM, lineo and others. Busybox is being maintained by Erik Andersen
Busybox is available at http://busybox.lineo.com
Ash is a very small Bourne shell available at http://www.debian.org/Packages/unstable/shells/ash.html
Sysvinit is the most used init package for Linux. We will use init and the C version of the start-stop-deamon. Sysvinit is available at \"ftp.debian.org/debian/dists/slink/main/source/base\"