Found the answer myself. My problem was that I was making bad iso cds. I was using an old parrallel port HP CdWriter Plus which gave me isos with very subtle defects. Everytime I burned a new E-Smith Cd, different parts of the boot.img disk would work. After burning on my friend's reliable cdburner, I got a good copy.
Also, are you using old hardware? My original E-Smith box was going to be a Adaptec SCSI 2940 with Intel Triton chipset (FX). Apparently RH7.x balks at both of them. So if you are pretty confident that your boot disk is good, check your hardware and verify it against Red Hat's Bugzilla. And don't believe what their HCL says - according to their hardware compatibility list, I shouldn't have any problems with my Adaptec 2940. A good way to check if the problem lies with E-Smith or Red Hat is to try to install with RH7.x first - If you see the Red Hat install go bad, it's not E-Smith's fault.
Dang, this sorta reminds me of installing Windoze....