I have just had my first successful boot of a root filesystem completely contained in RAM using unionfs and squashfs. I used PXELinux to boot the second system. The second system downloaded the kernel and the initrd. The boot sequence began and the initrd downloaded the squashfs root filesystem and placed it on a ram disk. The initrd mounted the squashfs, then mounted a tmpfs which would act as the read/write portion of the unionfs. The squashfs and tmps were mounted into the unionfs. The initrd then called pivot_root to change to the unionfs as the root and began the init sequence of the squashfs.
The only downside was that it took about 3 1/2 minutes for the 95MB squashfs to download, but I think this was because the test was run under two virtual machines and networking for VMs is not always the best. With this complete I can now work on getting it setup to be a webserver and get the LVS setup working.
P.S. I think I might also create a Ubuntu Live CD that will load the filesystem into memory and run from there. Should result in a much quicker operating system.