This is an interesting find, but the MSFT doco appears wrong.
The cdroms used are image files of original MSFT masters, rather than home grown patch files, as is the usual fare. The machine is a VPC 2004 machine running under Windows 19:0 (2k).
I found this MSDOS7 thingie on installing Windows 2000 sp4 over Windows 98se. It seems to be a unmodified version of DOS from 98se. The files are identical with Windows 98se files. There's no magic 'ver = 7.00' thingie here, but yes, it does. tfc finds no difference between these files and those i captured from the win98cd, except that it has 'defrag.exe'.
A similar process of Win2000 sp0 over Windows 98fe yields the same result: binary copies of files from the Windows 9x directory.
There's a boot.dos file in the root directory, that if added to the end of boot.ini, will indeed give the required options. It looks like c:\=MS-DOS. Open up a windows cmd prompt, change to the root directory, and type boot.dos >> boot.ini, to add it to the menu.
This works in the german version too. I set up a version of the german windows 98, and installed the german windows 2k on top of it, and golly gee these files appear again. As with the english, the upper-case files are in the root directory, and ye still have to do type boot.dos >> boot.ini to make it work.
[.] [..] ansi.sys attrib.exe AUTOEXEC.UPG
chkdsk.exe choice.com command.com CONFIG.SYS CONFIG.UPG
country.sys debug.exe defrag.exe deltree.exe diskcopy.com
display.sys doskey.com edit.com edit.hlp ega.cpi
emm386.exe extract.exe fc.exe fdisk.exe find.exe
format.com himem.sys ifshlp.sys IO.SYS keyb.com
keyboard.sys keybrd2.sys label.exe mem.exe mode.com
more.com move.exe mscdex.exe MSDOS.SYS nlsfunc.exe
scandisk.exe scandisk.ini smartdrv.exe sort.exe subst.exe
sys.com xcopy.exe xcopy32.exe xcopy32.mod
1,825,501 bytes in 47 files and 2 dirs 1,925,120 bytes allocated
Most of this is MS-DOS stuff. The ring-in is 'defrag.exe', which gives an error-message to the end of 'This program requires microsoft windows', when run in the vanilla dos. So it's up to deletion. Of the rest, for better testing, i have done 'copy xcopy32.mod xcopy.exe', because that's what it is.
Beside defrag.exe, the other files up for replacement is edit.com/.hlp/.ini. "Edit" is a real editor, so this one comes out as msed.
MSDOS.SYS looks like this
Neither attempts have yielded START (a win32 program), being copied, but do copy XCOPY32.EXE, which is not in the MSFT list. Still, it's an interesting result. EDLIN from Windows 2000 does not runs under this DOS. Loadfix does, though.