I tried option #1 using FreeDos. I ran into more or less the same problems. Maybe that would give some hint to your very deep research.
PS:
Just a word of caution to anyone using method #1. Do not use FreeDOS. Use a DOS bootable disk derived from XP. Fdisk.exe in this has a limitation in changing the primary partition. Use fdisk.exe from FreeDos to overcome this problem. Do not use anyother files form FreeDos....
How to boot/install from USB key ?
in Install Windows from USB
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I tried option #1 using FreeDos. I ran into more or less the same problems. Maybe that would give some hint to your very deep research.
PS:
Just a word of caution to anyone using method #1. Do not use FreeDOS. Use a DOS bootable disk derived from XP. Fdisk.exe in this has a limitation in changing the primary partition. Use fdisk.exe from FreeDos to overcome this problem. Do not use anyother files form FreeDos....