Its a good learning tool. I never did it myself, but I had a friend who built everything using LFS.
The pains follow soon after you finish your custom distro
1.>No automatic package management. So updating anything is a pain
2.>No automatic security updates
3.>Installing new software is also a pain because of lack of package dependences.
4.>Large software packages like Openoffice etc. will take ages to install since you have to build them from source.
Bottomline: If you are interested in learning how a distro is made, go ahead and do it. But don't plan on using what you built for daily usage.
There are source based distro's which take away the pain of package management & dependencies. As they are still source based distros, installing anything new will take some time as the package has to be built from source.
Gentoo seems the best to me. T2 would be 2nd best.
Gentoo Linux -- Gentoo Linux News
T2 SDE - The Open System Development Environment
BTW, since you are exploring Linux, sometime down the line you might also want to look at OpenSolaris, and *BSD (FreeBSD, NetBSD, OpenBSD)
