Nerdpedes,
have a look at
https://security.stackexchange.com/questions/64915/what-are-the-biggest-security-concerns-on-pxe
Best of:
I can capture a full machine image. Do your systems automatically connect to the domain controller after setting up the machine? If so, this image probably has domain controller credentials on it, that I can capture and use elsewhere.
Computer makes a DHCP request --> DHCP server responds with address and PXE parameters --> Computer downloads boot image using TFTP over UDP
If the good guys got the traffic on that low level, unencrypted. Then they would have it all.
WinPE can run from RAM, you could boot to a virtual disk over the network, most linux flavors can run as a Live CD...
You can get a lot of stuff running in a WinPE environment, especially if you're the one writing the software.
Yes, this is all true but you need to exit the winPE environment to run the OS. You say you can boot to a virtual disk over the network. Wouldn't this be a thin client / terminal services rather than PXE?