Assume (hd0) is GRUB4DOS bootable disk, target disk image is in (hd1,0).
Files in (hd0,0)/ : grldr, menu.lst, winsetup.iso, firadisk.img
File in (hd1,0)/ : hddimg.img
In this example both (hd0) and (hd1) are IDE disks.
If you use USB/SATA, you have to add USB/SATA drivers to floppy image and merge txtsetup.oem.
menu.lst of Install Windows from ISO to IMG
title Setup Windows from ISO to IMG Step 1 : Boot from ISO, with virtual CD+Floppy
Target disk image must be initialized before boot before setup.
If not, setup may install MBR code in wrong disk.
Target partition in disk image should be created before boot before setup.
If not, it will get non-C drive letter.
If you have uninitialized disk image, you may boot Step 1, create a partition in target disk image, don't format it yet, press F3 to quit and reboot into Step 1 again.
title Setup Windows from ISO to IMG Step 2 : Boot from IMG, with virtual CD