Is Grub installed on /dev/hda2? If so, you could try dropping the (hd0,1) from the kernel and initrd lines (keep it on the rootnoverify line). Then it would more or less match my grub entry:
Code: Select all
title PizzaPup 3.1
rootnoverify (hd0,4)
kernel /boot/pza-301/vmlinuz root=/dev/ram0 loglevel=3
initrd /boot/pza-301/initrd.gz
As for why the CD works, that's because LiveCD is designed to save to the save-file on the harddrive, then load it on the next boot. The "Frugal HD Install" was just a modification of that, using Grub to boot from the harddrive itself rather than a CD. After it's booted, it behaves exactly the same as if it had been booted from a CD.