With the default kernel that came with VL7.0, everything works fine. However i wanted to try out 3.2 on reading this thread so downloaded kernel-src-3.2-i686-1vl70.txz, kernel-modules-3.2-i686-1vl70.txz, and kernel-3.2-i686-1vl70.txz and installed them using installpkg in that order. I then booted using the new kernel when i observed the internet not working. I also tried with vasm to configure dhcp, it didn't give any error but also didn't start the net.
Machine specs - Thinkpad R61, 2G RAM, Intel 945GM chipset