Was able to get past the FATAL: kernel too old. Even with line L67 changed to higher version you will get FATAL: kernel too old when jumping up to say 4.15+ kernels. The issue is, you are trying to compile against the existing OLD running kernel. You need to boot your system up with your NEW compiled kernel and then follow these instructions https://rancher.com/docs/os/v1.x/en/installation/custom-builds/custom-rancheros-iso/ to build your new file system.
I actually just injected the NEW vmlinuz kernel into RancherOS’s boot dir, updated syslinux and rebooted. Got few errors and Waiting for system-docker will run for 300 seconds and timed out. But everything is fine on boot. I then just followed the iso link above to created the rest.