Not such a stupid question.
I imagine the bios sees that it is to start a CD, locates the .img file in the [boot] directory, copies that to memory and executes it.
Is there a little program where by you boot to DOS, change to the directory that is the root of the CD files, run the program and it boots the CD files as if they were on the CD? Doesn't seem too difficult.
My situation is I have a HDD with several partitions, the first has Win98 DOS startup (eqiv of bDos, dos.sys, command.com) and I have copied an XP installer to the last partition. This installer does a bit of customizing that won't start from DOS.