The new ISO (or loop) chainload mechanism makes chainloading a breeze. It is actually possible to chainload ISO images (LiveCD/DVDs) with GRUB Legacy, however there exists no way to pass kernel cmd line arguments before boot. In any case, the ISO images in question should be built keeping kernel cmd line arguments in mind.
Without kernel cmd line options, booting ISO images with GRUB2 will fail in the physical media check/test stage of the ISOs boot process. Gentoo liveCD is handy because it has a minimal shell which lets the user mount the squashed image to the correct location and then press the Esc key to continue the boot process. This makes it possible to have a handy way to install an operating system with everything in RAM, especially for "light weight" LiveCDs. No more need to listen to a whining CD/DVD drive on each new command!
To chainload an ISO with custom or default kernel command line arguments, an entry similar to the following can be added to GRUB2's grub.cfg file:
FILE /boot/grub/grub.cfgExample entry for chainloading an ISO file
menuentry "SYSRESCUECD" {
set iso=/systemrescuecd-x86-3.8.1.iso
loopback loop ${iso}
linux (loop)/isolinux/rescue64 nomodeset vga=791 docache setkmap=fr isoloop=${iso}
initrd (loop)/isolinux/initram.igz
}