Iso can be mounted within Ubuntu no problem, and iso emulation works perfectly for a virtual machine, The idea is to pass on iso emulation from the boot strap into the linux kernel, Currently a limited number of iso can be "booted" just because of how the disk is set up, and this takes major customization to set loop-back settings,
http://ansi.23-5.eu/2011/10/21/howto-boot-iso-images-via-grub2-with-ubuntu/ . Currently once you emulate the disk, then load the kernel it looses the emulated drive, because the boot-strap simply passes on boot information. The idea is to make iso's as universally accessible, and easy as putting in a CD, to save physical media, and use for small form factor devices that don't use cd's.
Currently there are many types of bootable .iso's *most* linux ones work with the existing tools with careful configuration. but If a system of emulation was set up all iso's work independent of what is on it with no configuration. This would enable any set of tools to be bootable.
Also, a lot of Cd disks are built to specifically to look for a cd drive, so once you boot the cd, it fails to find the contents of the iso, and setting up a memdisk will not work because once the kernel is booted the emulation does not get passed on,
http://www.syslinux.org/wiki/index.php/MEMDISK#What_is_MEMDISK.3F , "The majority of Linux based CD images will also fail to work with MEMDISK ISO emulation. Linux distributions require kernel and initrd files to be specified, as soon as these files are loaded the protected mode kernel driver(s) take control and the virtual CD will no longer be accessible. If any other files are required from the CD/DVD they will be missing, resulting in boot error(s)."
And many new users look to unetbootin as if it makes iso's universally bootable, when it has pre-made settings made to work with specific distributions, and I have seen many problems arise from users trying to make windows or other cd's to boot with it.
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