Loop device mounts inside the appliance don't work.  The reason
is just that loop device requires a filename to be specified,
where a device is being expected.

This is an example using a Fedora 11 LiveCD:

$ ./fish/guestfish --ro -a ~/Fedora-11-i686-Live.iso

Welcome to guestfish, the libguestfs filesystem interactive shell for
editing virtual machine filesystems.

Type: 'help' for help with commands
      'quit' to quit the shell

><fs> run
><fs> mount /dev/sda /
><fs> ls /
EFI
GPL
LiveOS
README
isolinux
><fs> ls /LiveOS
livecd-iso-to-disk
osmin.img
squashfs.img
><fs> help mount-options 
mount-options - mount a guest disk with mount options
     mount-options <options> <device> <mountpoint>

    This is the same as the "mount" command, but it allows you to set the
    mount options as for the mount(8) *-o* flag.

><fs> mount-options loop /LiveOS/squashfs.img /isolinux
libguestfs: error: do_mount_vfs: /LiveOS/squashfs.img: expecting a device name