Update:
I was just advised on the Grub mail list that:
"you should use whatever kernel/initrd understands and
neither $loop nor $root are understood by kernel. The fact is that
linux kernel cannot read from grub2 (loop) device so, unless
support is in initrd this simply cannot be done."

I then modified the grub.cfg entry as below for both cases, but still no luck!
  linux (loop0)/install.386/vmlinuz boot=live verbose noeject showmounts 
httpfs="http://192.168.2.100/debian-testing-i386-lxde-CD-1.iso";

Regards.

-- 
FreeBSD_amd64_11-Current_RadeonKMS


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