Hi,
I've just checked /etc/sysconfig/rhn/up2date,
and read ALL lines referring to "pkg".
I still have the question
What is "skip" supposed to mean?
The default setup/configuration of up2date is to 'skip' the kernel package. Probably to prevent an unattended installation/upgrade of your current running kernel.
To install the updated kernel do as the others in the thread have said (Read)
I prefer the commandline up2date over any GUI..
up2date -i kernel --force will overide the 'skip' and install the kernel (Leaving the original still available to boot from of course)
Cheers, Michael