ah so
      you're claiming something like this would work out of the box:
      
      label ubuntu1104
      
      kernel memdisk
      
      append iso initrd=ubuntu.iso
      
    
    This is one entry from my multiboot USB drive's GRUB menu:
    
      title Ubuntu Netinstall x86
          find --set-root /iso/ubuntunetinstall.iso.gz
          map --mem /iso/ubuntunetinstall.iso.gz (hd32)
          map --hook
          chainloader (hd32)
        
    
    To my
      knowledge, Linux ISO booting consisted of
      
      [A] booting kernel
      
      [B] processing INITRD
      
      [C] mounting CD/DVD/BluRay, or ISO
      
      [D] continuing.
      
    
    This is another entry in my menu.lst:
    
          title Kubuntu 10.04
          find --set-root /iso/kubuntu-10.04-desktop-i386.iso
          map /iso/kubuntu-10.04-desktop-i386.iso (0xff)
          map --hook
          root (0xff)
          kernel /casper/vmlinuz file=/cdrom/preseed/kubuntu.seed
          boot=casper persistent
          iso-scan/filename=/iso/kubuntu-10.04-desktop-i386.iso splash
          initrd /casper/initrd.lz
        
    Both boot methods work just fine.
    What I
      mean is only doing C and D, everything has to be self-contained in
      1 single file
      
      For DOS this goes fine as it doesn't enter protected mode.
      
    
    Not entirely true. This is another of the entries in my list:
    
    title FreeDOS Balder Floppy
          map --mem /iso/balder10.img.gz (fd0)
          map (hd1) (hd0)
          map (hd0) (hd1)
          map --hook
          chainloader --force (fd0)+1
          rootnoverify (fd0)
        
    This works fine, as long as I don't boot with HIMEM.