The previous approach is stupid. It uses a preformatted GRUB floppy which gets mounted using mtools.
We should use the genisoimage approach, like here.
It works really well, and also has the added benefit of giving us much more space for additional kernel modules if/when needed. You can basically fill a full CD image (650 or 700 MiB) if you need, since GRUB is capable of reading files from the CD