I have a 16GB USB flash drive that I want to set up like this:
It boots WinPE
It has useful diagnostic and system maintenance tools
There are several .ISO files of operating system install DVDs on the flash drive
I can mount one of the .ISO files and start an OS install.
Perhaps there's a way I can use Virtual CloneDrive within WinPE?
Maybe you can try ImDisk. I've used this to install Windows 7 from a USB disk where Windows wouldn't install if it did not see its files on a DVD. I used the steps here to install the driver from the command line.
If all you need to do is install the OS you could use
Diskpart
to partition the drive,ImageX
to copy a custom .wim file to the partition andBCDboot
to copy boot information to the system partition.Check this out for more info.
Personally, I use GRUB4DOS to do things like this. It's a boot loader capable of booting from ISO images, floppy images or partitions located on any media (USB, CDROM/DVDROM etc.). I personally have a USB stick with WinPE/ImageX, a huge collection of diagnostics and install media for Win7 and a few linux distros.