I didn't have any problems with that, the problem was purely with XP_RAM.iso .
Grub4dos is case sensitive at ISO 9660 file system, your CD.
Yeah, it turns out that Grub4dos was actually finding the XP_RAM.iso on my VHD third partition, so was set root and loading XP_RAM.iso from there, which was an old, incorrectly built one, which wasn't loading WINNT.SIF. I've got round that problem by changing the first line to "find --set-root /XPRAMCD.lst" and making that file in the root of the CD. Very confusing, but I've finally managed to successfully install from USB, CD and HD, in VMware at least