the "initrd.img" file is isolinux/init.lz in 7.0
The setup that you loaded was from the 6.0 initrd.img. It does not understand the new format of the 7.0 ISO and wouldn't be able to install from it if you manually pointed to it.
Thanks Uelsk8s. What I should have said about the next logical step was to try to find the ramdisk file on the 7.0 ISO. I did try init.lz before trying to use the old 6.x initrd.img. I ran into several problems with this. The machine would get caught in a reboot loop after it would prompt me for a video mode: even when selecting auto detect. The soloution I owe in small part to you for making me take another look at the isolinux dir. There was the initrd.lz I had previously overlooked! I told you guys I wasn't a Linux Pro.
At any rate this solved the problem and the setup was now able to detect the "win95" partition to install from. Many thanks, in some small part you saved the project.