Follow the instructions on:
http://www.nslu2-linux.org/wiki/Optware/PlugComputers

Both gcc and make are in /opt/bin if you used ipkg install optware-devel.
Versions are: make 3.81 and gcc 4.2.3

Hope you set up the path /opt/bin and /opt/sbin in your path.

Also edit the makefile to get rid of cross compile.
Everything is in the link above. If you follow it you can compile natively.

If you downloaded the pogoplug-gcc package, that is for cross compiling and you set that up on your desktop/laptop linux system.
With that you don't need to edit the makefile since you will cross compile.

Addendum:
Ok, Just checked repository for make and the latest is 3.82. The parser has been tightened up in 3.82

You need to change some lines in the Makefile:
config %config: scripts_basic outputmakefile FORCE
to
%config: scripts_basic outputmakefile FORCE
and
/ %/: prepare scripts FORCE
to
%/: prepare scripts FORCE

I believe the lines are around 391 and 1445 respectively.
I verified above works by making the kernel over again successfully.
Thanks to your post, I updated the link above.

You might consider cross compiling since it is a lot faster.
Good Luck!

make clean
make menuconfig
Set the configuration you want.
make

Then wait for a really long time. It is a lot faster on a Pogoplug Pro. The desktop even way more.

Except for the make clean, everything else should agree with the link mentioned above.

If you get any errors you might want to google them and if you need a package, just "ipkg list|grep packagename" and this should give you an idea what to load.

I am not getting any errors so I am not sure what problems you are having. You might need to copy and paste the actual errors. Some warnings are ok, it will still build. Just as long as you end up with a vmlinux and I am assuming you are doing this to build some modules which you can find with "find . -name *.ko" everything should be ok.

Addendum:
Make sure you do "cp pogoplug_kernel.config linux-2.6.22.18/.config" as mentioned in the guide before doing any make. It is the config supplied by cloud engines.