The following line can be found in the src_unpack function of current genkernel ebuilds: use selinux && sed -i 's/###//g' gen_compile.sh This assumes that the current working directory of src_unpack is $S, when it is actually $WORKDIR (as per man 5 ebuild). The output of emerge '=sys-kernel/genkernel-3.4.10-r1' with USE=selinux (as set by the SELinux profiles) includes the following: sed:can't read gen_compile.sh: No such file or directory
Fixed in the tree. Sorry this took so long.