Live CD customization queries

Edit is the one you want to chroot into, mnt is where you mount the read-only ISO, extract-cd is the extracted ISO. The ISO is fine as read-only, as I understand it, it is mounted at mnt. You DO NOT want to edit mnt, just the extracted CD. When you are done, you will make your own ISO. Anything you edit in the LiveCD, as I understand it, will be reflected in the installed system. Anything which has folders such as extract-cd, edit or mnt is not done inside chroot. As for the kernel - you need your own kernel here, and then you can

sudo cp /path/to/vmlinuz extract-cd/casper/vmlinuz
sudo cp /path/to/initrd extract-cd/casper/initrd.lz

When done with the kernel:

sudo chroot edit
mkinitramfs -o /initrd.lz [kernel version]
exit
mv edit/initrd.gz extract-cd/casper/

And then follow the guide from Cleanup. Hope this works!

Those instructions on the wiki are extremely outdated and these days, quite complicated when there are tools such as Ubuntu Builder available. Since you are customizing Gnome, I highly recommend you follow the steps in this answer which explicitly discusses easily customizing the 12.04 LiveCD with Gnome-Classic.

As for your questions, here are the answers:

• 1, 2, 3: no longer necessary with Ubuntu-Builder, see answer.
• 4 - Backgrounds: see answer, section 5. Customization 2: Backgrounds and Themes
• 5, 6, 7 - kernel update: see answer, simply run sudo apt-get update && sudo apt-get dist-upgrade in the text chroot started from Ubuntu-Builder
• 8 - Gnome-Classic instead of or in addition to Unity: see answer, section 3. Updating, adding Gnome Classic and other package management
• 9 - gdm: see answer, run sudo apt-get install gdm from UB chroot, and select it instead of lightdm in the dpkg popup

• 1 - it is OK, iso's are supposed to be mounted read-only.

• 2,3 - you mainly change edit, as this is where you "chroot". Nevertheless, when you update the kernel, you have to "dump" the kernel and the initrd.img-... that you install inside the chroot at /edit/boot/... into the casper folder, inside the "extract-cd". So, to update kernel: Inside chroot, do an apt-get install linux-mage-XXX-whatever to get a new kernel version. This installs two things: a linux-image-XXX-whatever kernel image and a initrd-XXX-whatever inside your /boot directory (when outside the chroot, this directory will be edit/boot). If you blindly follow the wiki, first of all, and dump these two into extract-cd/casper, there are two problems with your initrd: one is it is compressed with gzip (extension .gz), and you need it as an initrd.lz (compressed with lzma), and second, the initrd that came when you installed the new kernel package may not have the squashfs module support to allow reading your live-cd. Both these problems are solved from inside the chroot (when the "edit" folder temporarily becomes your "root" environment, by generating a new initrd.lz using mkinitramfs for the new kernel version that you want to update to. This solves both problems, with one shot.

• 5 Should be done from outside the chroot environment, after you got the relevant files working inside the chroot (see my comment above)

• 6 It is done outside the chroot, but only if you really want to add new modules and maybe other stuff to your initrd. Otherwise stick to my comment above, to regenerate an initrd.lz with mkinitramfs.

• 7 As mnt is read-only, you do not do anything there. Everything is/was already copied off to either "edit" (the de-compressed squash-fs file) or to "extract-cd". You need to update extract-cd/casper such that vmlinuz and initrd.lz there are actually the new versions you want.