Your fix to pick up the .sfs in the .iso worked
![Cool 8)](./images/smilies/icon_cool.gif)
And i just noticed what the problem is, for some reason the .sfs in the new .iso is being named wrong - new .sfs is called "puppy_sqzd_4.99.2.sfssqz.sfs" remove the "sqz.sfs" from the end and it boots just fine.
![Smile :)](./images/smilies/icon_smile.gif)
cheers.