Please take the following with a pinch of salt. I don't own a 7020, and the current sources for the bootloader is not public. In other words: I'm guessing...
As far as I know, there has been certain improvements in the bootloader from the lastest 7020 version to the current 7025 version. One of the improvements concerns the possibility to transfer parameters to the linux kernel that you want to boot. This is possible to do in the 7025 version, but probably not in the 7020 version. When you boot a standard kernel from the CF on a 7020, the kernel will be loaded from the CF, but the hard-wired root file system will still be flash. (On the 7025, you can use a kernel parameter to intruct the linux kernel to use a partition on CF or HDD as the root file system).
To get around this problem on the 7020, you would need to patch the kernel, to change the hard-wired root file system. More guessing: you can probably do this using a binary editor on a kernel, find the "root=" string, and patch the path to the root file system. Or you could change the kernel configuration and make your own kernel...