If kernel-modules are added to IMAGE_INSTALL then the do_rootfs task during image build goes into infinite loop. This is fairly recent change. It was working fine on march 1st. To reproduce it. It could be modulewrapper changes that went in or Martin's module separation changes or something interacting with those changes badly Add kernel-modules to IMAGE_INSTALL in meta/recipes-core/images/core-image-minimal.bb and then bitbake core-image-minimal In the end ps -ef shows depmod -a -b ... being invoked in a loop forever.
as it turns out that my defconfig was building almost every kernel module available in 3.8. So the modules dir was 1.2G in size. Now image builder was taking this 1.2G of modules and running depmod on them one by one and I guess it was taking many hours. Probably it would have finished in 10-12 hrs I have since fixed the defconfig so it does generate sensible list of modules only so the images are building fine. However I still think there might be a performance issue here