diff --git a/modules.d/90dmsquash-live/dmsquash-live-genrules.sh b/modules.d/90dmsquash-live/dmsquash-live-genrules.sh
index 72695a9c..5642d531 100755
--- a/modules.d/90dmsquash-live/dmsquash-live-genrules.sh
+++ b/modules.d/90dmsquash-live/dmsquash-live-genrules.sh
@@ -1,7 +1,8 @@
 #!/bin/sh
 # -*- mode: shell-script; indent-tabs-mode: nil; sh-basic-offset: 4; -*-
 # ex: ts=8 sw=4 sts=4 et filetype=sh
-if [ "${root%%:*}" = "live" ]; then
+case "$root" in
+  live:/dev/*)
     {
         printf 'KERNEL=="%s", SYMLINK+="live"\n' \
             ${root#live:/dev/} 
@@ -15,4 +16,11 @@ if [ "${root%%:*}" = "live" ]; then
             ${root#live:/dev/} 
     } >> /etc/udev/rules.d/99-live-squash.rules
     echo '[ -e /dev/root ]' > /initqueue-finished/dmsquash.sh
-fi
+  ;;
+  live:*)
+    if [ -f "${root#live:}" ]; then
+        /sbin/initqueue --settled --onetime --unique /sbin/dmsquash-live-root "${root#live:}"
+        echo '[ -e /dev/root ]' > /initqueue-finished/dmsquash.sh
+    fi
+  ;;
+esac
diff --git a/modules.d/90dmsquash-live/dmsquash-live-root b/modules.d/90dmsquash-live/dmsquash-live-root
index f8aa805a..c857e48d 100755
--- a/modules.d/90dmsquash-live/dmsquash-live-root
+++ b/modules.d/90dmsquash-live/dmsquash-live-root
@@ -44,11 +44,19 @@ getarg rw && liverw=rw
 [ -z "$liverw" ] && liverw=ro
 # mount the backing of the live image first
 mkdir -p /dev/.initramfs/live
-mount -n -t $fstype -o $liverw $livedev /dev/.initramfs/live
-RES=$?
-if [ "$RES" != "0" ]; then
-    die "Failed to mount block device of live image"
-    exit 1
+if [ -f $livedev ]; then
+    # no mount needed - we've already got the LiveOS image in initramfs
+    case $livedev in
+        *squashfs.img) SQUASHED=$livedev ;;
+        *ext3fs.img|*btrfs.img) FSIMG=$livedev ;;
+    esac
+else
+    mount -n -t $fstype -o $liverw $livedev /dev/.initramfs/live
+    RES=$?
+    if [ "$RES" != "0" ]; then
+        die "Failed to mount block device of live image"
+        exit 1
+    fi
 fi
 
 # overlay setup helper function
diff --git a/modules.d/90dmsquash-live/parse-dmsquash-live.sh b/modules.d/90dmsquash-live/parse-dmsquash-live.sh
index 38610fb1..6e0db291 100755
--- a/modules.d/90dmsquash-live/parse-dmsquash-live.sh
+++ b/modules.d/90dmsquash-live/parse-dmsquash-live.sh
@@ -38,6 +38,8 @@ case "$liveroot" in
         rootok=1 ;;
     live:/dev/*)
         rootok=1 ;;
+    live:/*.[Ii][Mm][Gg]|/*.[Ii][Mm][Gg])
+        [ -f "${root#live:}" ] && rootok=1 ;;
 esac
 info "root was $root, liveroot is now $liveroot"