Seems like you are doing all the right things (with one possible oversight). Note that (on my slackware system) the newly-built kernel is usually in path-to-source/linux/arch/i386 and is named bzImage rather than vmlinuz. Is this the file you are comparing with /vmlinuz to determine if your changes have reduced its size? A newly-built kernel is usually installed with "make install", which appears to be missing from your steps -- but this may not apply to Mandrake.
Also, note that anything compiled as a module will not add to the size of the kernel, so removing unused features compiled as modules will not reduce your kernel size. Similarly, you should compile features in your new kernel as modules whenever possible to reduce size (note: do not compile support for your root filesystem type as a module).
You might also check your compile settings; using -g (for example) will greatly increase the size of your executable. Your 3.3 Mbytes is definitely a large kernel; for reference, my slackware 8.1 kernel (with a number of features enabled) is approximately 1.3 Mbytes.
Hope this helps.
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