hello,
I think missing some parameter in Makefile.am and form ur logs its shows
ERROR: oe_runmake failed
it mean the issue seems to be with kernel compilation rather than with yocto.
oe_runmake only calls make on the kernel tree. So, can you see if building the kernel (in the build/tmp folder) manually works?
Also check the defconfig file that is used manually.
And also same time please check and verify that have you all the host environment set-up as per documentation?
Request to please refer this link once (http://www.yoctoproject.org/docs/current/yocto-project-qs/yocto-project-qs.html)
From above link
(
Ubuntu and Debian
The essential and graphical support packages you need for a supported Ubuntu or Debian distribution are shown in the following command:
$ sudo apt-get install gawk wget git-core diffstat unzip texinfo gcc-multilib \ build-essential chrpath socat libsdl1.2-dev xterm
)
$ sudo dpkg-reconfigure --terse -f readline dash
$ sudo apt-get install sed wget subversion git-core coreutils unzip
texi2html texinfo libsdl1.2-dev docbook-utils fop gawk python-pysqlite2
diffstat make gcc build-essential xsltproc g++ desktop-file-utils
chrpath libgl1-mesa-dev libglu1-mesa-dev autoconf automake groff libtool
xterm libxml-parser-perl vim-common xz-utils cvs tofrodos
libstring-crc32-perl ubuntu-minimal ubuntu-standard patch
libbonobo2-common libncurses5-dev
Extra packages are needed for Ubuntu-64b
$ sudo apt-get install ia32-libs lib32ncurses5-dev
and if not then please install all build dependencies for your host system (Ubuntu or whatever...)
may this will help you, 
Revert back with result and query if any,
Thanks and regards
Jaymin Dabhi
