BlueMage, here to save the day! Why? Because I've done this several times now
Install Vector from a DSL install, I mean.
First off, I would post my (modified) vinstall-iso script, but regretably it's on the slim client I have at home. That machine has NO cd-drive, hence why I've gotten fairly intimate with this process. There are a few small modifications, namely commenting out certain checks. Specifically, I haven't commented out the -S as I've completely buggered it off. I've also buggered off the bits related to /sys - that frequently caused my install to fail before it even got going.
## Copy the initrd.img
echo "Preparing initrd ..."
gunzip -c loop/isolinux/initrd.img > $INSTALLRD || \
error_exit "cannot decompress initrd.img from ISO-file"
Putting the gunzip'ing of initrd might work a bit better if you use this. As best i can tell, the -S is included so that the script doesn't break should the compressed file not be in a format the decompressor expects.
If I was at home I'd be able to give you a bit more help with this as I'd have it right in front of me. Unfortunately, that's not going to be until sometime mid-to-late January.