Let's divide it in TWO steps:
1) for the moment, forget everything about Windows, Mindows, 98lite.
1a) Are you able to make a DOS 7.x (Win9x) bootable floppy image, you can download one from the internet and modify it to your requirements?
1b) Can you install a virtual machine, like QEMU (+QEMU Manager):
http://www.davereyn.co.uk/or Virtual Box:
http://www.virtualbox.org/in order to properly test it?
1c) Are you able to use the created bootable floppy image in the making of a simple el-torito .iso image?
2) Once all points #1 are cleared, your best options, if you are trying to make a live CD, which is NOT the Minimize one, but just a transfer of your "custom" WORKING build from HD to Live CD are these two:
http://www.lachiesad...w98cd/page1.htmhttp://www.geocities...eedatarecovery/Choose ONE of the two, and try following it, if you have SPECIFIC questions, try to post them here, maybe someone can answer them, but you must realize that this is an experimental topic, rather "advanced", there are a number of difficulties implied in the process even if the said tutorials are followed to the letter, let alone if you introduce "variations" to them.
In other words, and this applies generally to the learning process about almost anything,things must be made in steps, first thing is to try replicating an already described procedure EXACTLY as it is, with NO changes whatsoever, next is introduce ONE, just ONE change, and see if it works, next you introduce another one, and loop back until you find a problem. This is the only way to identify a problem, whenever you introduce more than one change and the procedure won't work, you will have NO way to understand which one caused the problem.
As always in this kind of experiments, using a Virtual Machine and image files is STRONGLY suggested, as it allows for faster testing.
jaclaz