Found the problem, the Makefile in the drivers/usb didn't point to the drivers/usb/host directory for ISP1362 selection in menuconfig.
io scheduler noop registered
io scheduler deadline registered (default)
Serial: JTAG UART driver $Revision: 1.4 $
ttyJ0 at MMIO 0x81004000 (irq = 1) is a jtag_uart
usbmon: debugfs is not available
driver isp1362-hcd, 2005-04-04
isp1362-hcd isp1362-hcd: ISP1362 Host Controller
isp1362_hc_reset:
Clock not ready after 20ms
isp1362-hcd isp1362-hcd: can't reset
init error, -19
Initializing USB Mass Storage driver...
usbcore: registered new driver usb-storage
USB Mass Storage support registered.
Bluetooth: HCI USB driver ver 2.9
usbcore: registered new driver hci_usb
Freeing unused kernel memory: 352k freed (0x13c000 - 0x193000)
init started: BusyBox v1.1.1-pre0 (2006.03.06-00:20+0000) multi-call binary
can start debugging the reset problem now