Hi, it should be a nice enhancement to boot from network the LiveCD, like Fedora installation DVD or Knoppix terminal server. vmlinux and initrd should be provided with network and nfs drivers to nfsmount the directory containing squashfs.img
When we move over to the stock initrd infrastructure, this starts to get a lot more doable. All the groundwork is laid for that and I suspect we'll make the switch for Fedora 9.
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If you have sufficient memory, you can now do this with the livecd-iso-to-pxe script in livecd-tools. And other similar things can be accomplished with the ltsp toolset. Directly supporting this isn't something that is likely to go into the main livecd initrd anytime soon.