To netboot you only need the xterm-etherboot.img. Specify this as the "filename" option in your DHCP server.

It is created by running: mknbi-linux --ip=dhcp vmlinuz ramdisk.gz

If you want to play around with the ramdisk, uncompress it and mount it over loopback.

This is not a secure x-terminal!!! There is no access control. It simply broadcasts for XDMCP servers.

For more serious use, you probably also want to have a font server running somewhere and add that to the XF86Config-4 file in the ramdisk.