Hmm. That's very interesting mentioning about the "kernel.img" being "bad".
I've got exactly the same problem and behaviour when setting up a clean ArchLinux the other day:
a) Burnt initial image to SD card, works fine, rebooted
b) resized partition, rebooted fine, expanded filesystem, rebooted fine.
c) Did a "pacman -Syu" to bring base OS up to date (along with linux-raspberry images & firmware), rebooted ***hung at "rainbow" screen***
On my other SD card updating it up to 3.??.17 it was fine.
Wondering if this isn't a problem with ArchLinux or indeed further upstream with the RPi kernel itself affecting any OS you on it?
Many others appear to be getting similar sounding issues:viewtopic.php?f=28&t=7601viewtopic.php?f=28&t=7359
From age 8: Atari 800 XL > Spectrum ZX81 > Amiga 500+ > ESCOM 486+OS/2 warp (!), Few Dell Towers and Laptops (1 Alienware)
Currently in use: Dell XPS 630 > 2G iPod touch > 1G iPad 3G > 15" MacBook Pro > Raspberry Pi, Model-B