the only way I got windows 7, xp or vista working is by extracting the cd to the root of the drive and calling bootmgr (win7) or the boot file of the cd with grub, mounting a iso of a windows cd always crashes while installing
title Load bootmgr
root (hd0,0)
chainloader (hd0,0)/bootmgr
for multiple os capabilities check the microsoft deployement tool thread
the only downside there is so far is that it reformats the whole drive when you install :s