mountall waits for non-existent /dev/root

The Trusty system runs on Jetson TK1 (architecture is armhf). It has no initrd and fstab. The root filesystem is squashfs and hence is not writable. mountall hangs during boot and says "The drive for / is not ready ... Press ..". If I press M and enter the root password I am able to log in and see that the root filesystem is mounted and everything looks OK. With --debug flag I've found that mountall waits for /dev/root to appear. But there is no /dev/root even after the system has come up (if I press "S" to skip). The issue is that mountall creates /dev/.udev/rules.d/root.rules but the Trusty version of UDEV doesn't read rules from /dev/.udev/rules.d and will never create /dev/root