Sometimes the kernel on the installation CD won't boot on the machine to be upgraded, or the filesystem requires modules that are not present. In this case you will need to build a new kernel and rebuild the installation disk to use the new kernel. This is documented in the RedHat7 CDs mini-HowTo. This is an informal HOWTO not available through the Linux Documentation Project.
An older document that more fully describes an older Red Hat distribution build process is Burning a RedHat CD HOWTO.