Glad My post possibly helped a little bit, but it seems strange your still having so many issues.
As Far as I am aware, after the KonBoot splash screen , and after it loads it should in fact loop back to the
Grub boot menu, this is how you then tell it to boot off the Actual Hard drive (windows) on the PC,
To boot Windows after loading Konboot, you\'ll need a second Menu entry such as
title Boot Windows off First Hard Disk after Konboot
root (hd1,0)
chainloader (hd1,0)+1
boot
If you Boot konBoot , then when your returned to grub , boot Windows it should work.
I just tryed again and it still works. (on my system anyway, and on Halo\'s VM )
Hope this helps.
This is what my whole menu.lst looks like , all entries work on my setup.
color green/black red/blue
timeout 120
title ---===KonBoot (Inject Konboot into Ram)===---
kernel /boot/memdisk
initrd /boot/konboot.img
title ---===Boot from HardDisk after KonBoot===---
root (hd1,0)
chainloader (hd1,0)+1
boot