booting live cd images

[Piscium]

Many Linux distros have live CD images available for download. Once downloaded 
the usual procedure is either to burn a CD with it, or else use a live usb 
creator to put the image on a pen drive. With both options the result is a way 
to boot the downloaded distro.

I wonder if there is a third way to boot. Would it be possible to have Grub 
boot the downloaded file (.iso) on the hard disk directly? 

If so, could it be done by modifying the grub configuration file (by editing 
40_custom)? Or by rebooting the PC, putting grub into interactive mode and 
entering the necessary commands?

The solution might involve the loopback command, but I don't know how to use 
it. And might involve chainloading to the bootloader on the image (isolinux).

Any ideas?