The loop driver could be a module and would never be loaded, so the
iso-scan never takes place.
To let the iso-scan happen, it is now placed into the initqueue/settled
unconditionally.
now you can write grub entries like
set isofile="/Fedora-live.iso"
loopback loop $isofile
linux loop)/isolinux/vmlinuz iso-scan/filename=$isofile root=live:CDLABEL=Fedora-...
initrd (loop)/isolinux/initrd0.img