The disk image at ftp://updates.redhat.com/7.0/images/i386/update-disk-20001009.img is not bootable. For a start, it's an ext2 filesystem, not a DOS one like the one that comes with the boxed set. In addition, its contents are nothing like the one that comes with the boxed set. Here's the ls -alR: /mnt/tmp: total 104 drwxr-xr-x 3 root root 1024 Oct 3 18:32 . drwxr-xr-x 10 root root 1024 May 4 18:17 .. -rw-rw-r-- 1 root root 32605 Oct 4 16:08 fstab.py drwxr-xr-x 2 root root 12288 Oct 3 17:49 lost+found -rw-rw-r-- 1 root root 57287 Oct 4 13:05 todo.py /mnt/tmp/lost+found: total 13 drwxr-xr-x 2 root root 12288 Oct 3 17:49 . drwxr-xr-x 3 root root 1024 Oct 3 18:32 .. That's all. Looks like somebody posted the wrong disk image.
This is an updates disk for the installer - it is not a new boot image. The errata advisory includes instructions on how to use the update disk with the installer.