The 2.6.29 kernel has been used from Android versions 1.6 - 2.1 (Android 2.2 uses kernel 2.6.32). "Rooted" just means you have administrative privileges on the device. Normally they are sold "locked down" so users can't accidentally make any changes to system files that might mess it up or disable it.
@ta2025 - not yet. Rumor has it maybe sometime this month, but when I asked them via email Haipad didn't confirm there will even be an official 2.2 release.
#118 and #121 are just release numbers. The core/base kernel can be the same, but when it is compiled the developer includes the kernel modules that support specific hardware configurations, file systems, system calls, etc. But you also have to pay attention to the manufacturer/brand on the device, model number, and release date if you're updating the firmware - or you could end up trying to put the wrong rom on your device and (worst case) brick it or (not as worst case) lose some functionality.
#118 that reports it's Android 2.2 is apparently firmware that may have been hacked to misrepresent the Android version installed, or it was compiled by someone who screwed it up.
#121 is the firmware release that ships on the Haipad M701-R. That's the one with the remote control. "R" for "Remote" - if you don't have a remote control you don't have this tablet.
There are a couple versions of the M701 out there, one with two USB ports and no HDMI and an "updated" one with one USB port and the HDMI output (neither with a remote control). I don't know what firmware is supposed to ship on those. If you go to the Haipad web site there is a firmware update for the M701.
There IS an UNOFFICIAL firmware that is actually Android 2.2, so it is technically possible to put "Froyo" on these devices. However, since it is unofficial and still being tested it is not fully functional. If you put it on your tablet you WILL lose some functionality. There is a persistent rumor an official "Froyo" release is coming soon, I'd advise waiting for it instead.