I haven't really read much of the stuff linked here, but your initial problem of "what do I specify as the KERNEL" implies that you aren't even remotely there yet. Think about the way Linux boots over the network. It gets an IP address via DHCP, and the DHCP packet tells it where its kernel is, which it boots. IIRC, the DHCP packet also tells it where its root filesystem is, which it mounts. All you have is a CD image, or maybe a full Windows filesystem. You certainly can't tell it to boot the image, unless you think that downloading an entire CD every time you boot sounds like a good idea. (I'm pretty sure that that wouldn't work anyway, even if you had 700MB of RAM and the network card could actually access all of it.)

Doing a little research leads me to the fact that MS wants you to have an "Embedded Image" to boot. Regardless, you have a lot more work to do than just having a bootable CD. Hopefully that's a good step towards the next part of the process, but you definitely have more to do than just figuring out what file to boot; you need to create it first.