Why does Red Hat Enterprise Linux 5 system fail to boot with error "read_urandom: /dev/urandom: open failed: No such file or directory"?

Issue

• Red Hat Enterprise Linux 5 system fails to boot with following error when kernel upgraded from "2.6.18-164" to "2.6.18-194"

    read_urandom: /dev/urandom: open failed: No such file or directory  read_urandom: /dev/urandom: open failed: No such file or directory  
  Unable to access resume device (/dev/VolGroup00/swap)  
  mount: count not find filesystem '/dev/root'  
  setuproot: moving /dev failed: No such file or directory  
  setuproot: moving /proc failed: No such file or directory  
  setuproot: moving /sys failed: No such file or directory  
  switchroot: mount failed: No such file or directory
  Kernel panic - not syncing: Attempted to kill init!