There are several ways to deliver the root filesystem when booting via PXE:

• include rootfs inside initrd
  This is pretty easy to do. However, it means the initrd is very large, and that the WHOLE distro has to be stored in RAM, so it's only appropriate for very small distros, or modern machines. Also, it takes a fair bit longer to boot, since the whole rootfs has to be TFTP'd over the network before booting can occur.

  Despite the downsides, many OS's that want to provide bare-minimum support for PXE booting go this route.

  However, there are many benefits to using one of the other options below: 1) lower RAM requirements, because the live CD can discard parts of the rootfs that it isn't actively using, 2) faster startup, because the rootfs will be downloaded as-needed instead of all at once, and 3) nearly unlimited rootfs size, for the same reason (rootfs can be much larger than a DVD).

• NFS
  • the initramfs toolset supports this directly, though often you have to rebuild any particular initramfs to use the NFS configuration
  • the mkinitrd toolset also supports this directly, though again, you'll often have to rebuild any particular initrd
  
  
• httpfs
  fucking awesome