I tried using both memdisk and diskemu, but both just hang. Is there something special that needs to be done to have this included on my CDShell cd?

supposing you've done everything else as needed, you call winpe .bin file like this
chain /bscript/modules/isolinux/winpe.bin
of course, if you have win xp installation beside your winpe, then you'll also have to rename winpe's i386 folder to, say, xppe, and you'll have to hex the xppe.bin file to point to xppe folder.
almost forgot, you will also need to hex setupldr.bin from xppe folder and change all occurences i386 (3 or 4) to xppe.

I'll see what I can do with that. My problem is everythings being given to me as an ISO, so............